Guilds, trade and agriculture

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ARTHUR J. PENTY

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GUILDS, TRADE AND
AGRICULTURE

BT THE SAME AUTHOR

The Restoration of the Guild

System
Old Worlds for New

A Guildsman's Interpretation
of History

Etc.

GUILDS, TRADE AND
AGRICULTURE

BY

ARTHUR J. PENTY

H»

LONDON: GEORGE ALLEN & UNWIN LTD.
RUSKIN HOUSE, 40 MUSEUM STREET, W.C. i

First published in 1921

(All rights reserved)

PREFACE

IN a series of articles recently contributed to the
Daily News under the title " Europe in Chaos,"
the writer deduced the doom of modern civiliza-
tion from the general tendency of the ratio of
exchange to fall since the Armistice. In his last
article he suggested that " Perhaps the Guild
Socialists have seen a vision of the ultimate
solution," and then went on to say, " but if so
they must descend from the clouds and begin to
construct their system here and now." For " if
things are allowed to drift for another two or
three years it will be too late."

This little book accepts the general point of
view of European affairs as enunciated in those
articles and seeks to carry the discussion one
stage nearer to practical politics. If Guild Social-
ists are not to be seen everywhere at work con-
structing their system, it is not due to the absence
of any will or desire in the matter but to the fact
that except in respect of Building Guilds they
have no clear notion of how exactly to get to
work. We believe we know the ultimate solution ;

6 GUILDS, TRADE AND AGRICULTURE

but hitherto it has not been quite clear to us
what is the next step. The recent divisions
among Guild Socialists witness only too clearly
to the perplexity that has overtaken the move-
ment. It occurred to me whilst reading the
articles already mentioned, that perhaps this
perplexity was due to the fact that the Guild
theory and policy was inadequate to the extent
that it had been built up around the problem of
production to the neglect of the problem of
exchange. It was inevitable perhaps that this
should be so, since we were led in the first instance
to believe in the essential Tightness of Guild
organization from a study of the problems of
production rather than of exchange. Moreover,
the particular form that Guild theory has taken
is in no small measure due to the fact that it
arose to combat the bureaucratic tendencies of
Collectivism. In this light the defect of the
Guild theory is not that what it affirms is not
true, but that other aspects of truth have escaped
its attention. ,

The present volume aims at remedying this
defect by stating Guild theory aricl policy from
the point of view of exchange. In so far as it
differs from the previous Guild theory it is a differ-
ence of emphasis. Instead of .making the estab-
lishment of Guilds the central issue, it treats Guilds
as a means to an end — the end being the main-

PREFACE . 7

tenance of the Just Price — in the belief that the
establishment of the Just Price is the solution
of the problem of exchange in so far as this
problem is a question of money, and values. It
moreover shows that as far as England is con-
cerned, the revival of agriculture is the necessary
corollary of any stabilization of the exchanges.
By thus widening the issues it becomes possible
to carry the Guild idea into spheres where hitherto
it has not entered.

Mention has been made of the articles entitled
" Europe in Chaos." By the kind permission of
their author, Mr. J. S. M. Ward, and the Editor
of the Daily Neivs, I am able to include them in
this volume as an Appendix. The articles are
the summary of Mr. Ward's book, since published,
entitled Can our Industrial System Survive ?
(W. Rider & Sons, Ltd., 2s. 6d.). It is a book
I cannot 'speak too highly of, for if facts and
figures could awaken us to the realities of the
situation that confronts us it should do so, while
it is entirely indispensable to any one who is
anxious to understand the problem.

Jt remains for me to thank Dr. P. B. Ballard
for his assistance in preparing the MS. for press.

A. J. P.

66 STRAND-ON-GREEN, W. 4.
February 1921.

CONTENTS

PACE

PREFACE . . . . .5

I. THE NEED OF A SOCIAL THEORY . .11

II. ON WAGES AND FOREIGN TRADE . .17

III. THE TYRANNY OF BIG BUSINESS . . 25

IV. ON INVESTING AND SPENDING . . 33
V. ON PRODUCING MORE AND CONSUMING LESS 39

VI. FIXED PRICES PERSCS SPECULATION . . 46

VII. GUILDS AND THE JUST PRICE . . 56

VIII. How THE GREAT CHANGE MAY COME . 64

IX. AGRICULTURE AND EIMIGRATION . . 74

X. MACHINERY AND UNEMPLOYMENT . . 83

XI. ON MORALS AND ECONOMICS . . 96

XII. INDUSTRIALISM AND CREDIT . . . 103

APPENDIX. — EUROPE IN CHAOS . . 113

GUILDS, TRADE AND
AGRICULTURE

THE NEED OF A SOCIAL THEORY

WHATEVER differences of opinion may exist as to
the best way of facing the problem confronting
society, a general consensus is growing up that
the present order is doomed. It is agreed that
things are going from bad to worse, and that it
is only a matter of time — a few years at the most
— before the great crisis will arrive that will deter-
mine whether England is to go the way of Russia
and Central Europe — to anarchy and barbarism —
or to be reconstructed on some co-operative or
communal basis.

Which of these two ways things will go depends
upon our action in the immediate future. If we
allow ourselves to drift, then in a few years' time
we shall arrive at the state of affairs we know
by the name of Bolshevism. For " Bolshevism is
the last resort of desperate starving men ";' and

1 In this country Bolshevism is the last resort of dis-
illusionized social theorists.

11

12 GUILDS, TRADE AND AGRICULTURE

starvation is at the end of our story, as we shall
begin to understand more clearly when the reasons
for the present impasse are understood. From
this fate there is no possible means of escape,
except by boldly facing the problem that con-
fronts us and resolutely taking in hand the
reconstruction of society from its very foundations
upwards. Nothing less than that is any use at
all. For it is the foundations that are giving
way. And so, unless we act while yet there is
time, there can be no saving of our civilization.

Meanwhile the difficulty that confronts reformers
and statesmen alike is to know how to act. All
their lives they have lived on certain phrases and
shibboleths, and in a very literal sense taken no
thought of the morrow. They have talked about
progress and emancipation and our glorious civili-
zation, which, in spite of defects, they have never
failed to remind us is superior to any civilization
of the past. And now Nemesis is overtaking us.
A few years of war and our glorious civilization is
seen to be crumbling and our statesmen and
reformers are entirely at a loss to explain how
such a thing could possibly happen, for they lack
any comprehension of the problem of our society
as a whole. They have for so long been con-
cerned with the secondary things in society and
have so persistently neglected the discussion of
primary and fundamental principles, that they
are without the mental equipment which a great
crisis demands.

Evidence of their lack of grip on reality is
forthcoming on every hand. Men who know what

THE NEED OF A SOCIAL THEORY 13

they want go straight ahead. They act with
promptitude and decision. But in these days, if
one were to judge only by appearance, one would
say that the great idea in politics is to wait until
you are pushed, and then to yield with a becoming
dignity. But of course that is only appearance.
The real explanation is that our statesmen and
politicians have lost their way, and they are
without a compass to guide them. In other
words they have become opportunists because
they have lost their faith, and they have lost
their faith because the social theories upon which
they relied have become untenable. Before the
war the gospel of economic individualism that
had been the faith of the nineteenth century was
already discredited, while collectivism, which sought
to take its place, was proving unworkable in
practice. But the war has completed the destruc-
tion of these beliefs, and in consequence their
adherents flounder about, attempting first this
and then that in the hope that by some unex-
pected turn of events a path will be open to them.
But it all avails nothing. For without a belief
they lack conviction ; and this prevents them
from acting with unity of purpose or continuity
of effort in any direction. Among the thousand
and one things that claim their immediate atten-
tion they are unable to distinguish those which
are of primary and fundamental importance from
those that are secondary. So when by chance
they stumble upon something which if persisted
in would give results, they lack the determination
to go forward, and the moment they come up

14 GUILDS, TRADE AND AGRICULTURE

against some obstacle they turn round and run.
So it will be until we can establish a social theory
that will give such an explanation of the facts as
will guide them. For there is no such thing as a
purely practical problem, inasmuch as behind
every practical question is to be found a theoretical
one.

Now the underlying cause of the collapse since
the war of all social and economic theories that
had secured any widespread organized support is
that one and all of them took our industrial system
for granted as a thing of permanence and stability.
This is just as true of Socialist as of capitalist
economics, inasmuch as all Socialist theories pre-
supposed that a time would come when the workers
would be able to take over capitalist industry as a
going concern. The consequence is that Socialist
and Labour leaders are as much perplexed as
capitalists themselves at the sight of the system
crumbling to pieces. The possibility of this
dissolution had never occurred to them, and
they have no idea how to stop it. And this is
no wonder. For their belief in the permanence
of industrial organization was so absolute that it
led them to reject all ideas that were incompatible
with the industrial system ; and as all ideas of a
fundamental nature inevitably came into collision
with the industrial system it meant in practice
that they refused to recognize any fundamental
ideas whatsoever, so they are consequently left
stranded without an idea that has any relevance
to the present situation. The Bolsheviks alone
are not disillusionized ; and they are not dis-

THE NEED OF A SOCIAL THEORY 15

illusionized because in spite of their economic
formulije their faith is in the class war. So firm
are they in their belief that things will naturally
right themselves once the workers attain to power,
that they actually discourage speculation regarding
the future as something that diverts energy from
their central object of attaining power.

Recognizing, then, that the collapse of existing
economic theories is due to the fact that they
accepted industrialism as a thing of permanence
and stability, it follows that any new social theory
adequate to the situation must be based upon
principles that are antipathetic to industrialism.
Such principles are, I believe, to be deduced from
the informal philosophy of the Socialist movement
which is to be distinguished from its formal and
official theories. The formal theories of Socialism
based upon the permanence of industrialism are
now happily discredited for ever. But the informal
philosophy of the movement stands unimpaired,
for it is based upon something far more funda-
mental than any economic theory — the permanent
needs of human nature. On its negative side it
is a moral revolt against capitalism ; on the positive
side it rests upon the affirmation of the principles
of brotherhood, mutual aid, fellowship, the common
life. These are the things that the Socialist
movement finally stands for ; and they grow by
reaction. In proportion as existing society becomes
more hopeless, more corrupt, more unstable, men
will tend to take refuge in idealism ; and this
idealism the informal philosophy of the Socialist
philosophy supplies. Such people have hitherto

16 GUILDS, TRADE AND AGRICULTURE

accepted the economic theories of Socialism as
convenient formulae to give shape to their moral
protests. But intellectual comprehension among
them was rare, inasmuch as most of them swallowed
the theories without tasting them. When they
do taste them, they spew them out.

The deduction to be made from all this is that
Socialism is finally a moral rather than an economic
movement. It is because of this that it has
gathered strength in spite of the discrediting of
its successive theories. It is this that we must
build upon. Our aim should be to bring economic
theory into a direct relationship with this informal
moral philosophy, to dig as it were a channel in
which its whole strength may flow instead of being
wasted in the sands of contradictory beliefs and
impossible doctrines.

II

ON WAGES AND FOREIGN TRADE

IN the preceding chapter I urged the necessity of
a social theory that would bring economics into a
direct relationship with the informal Socialist
philosophy with its ideas of brotherhood, mutual
aid, fellowship and the common life. Recent
events have brought into a new prominence the
antagonism that exists between the head and the
heart of Socialism.

During the war wages were raised to keep pace
with the increasing cost of living. Nowadays,
when prices are falling, the demand is made by
employers that a corresponding reduction shall be
made in wages. Behind this demand is the
contention of employers that foreign trade cannot
be restored and unemployment lessened while
costs of production in this country remain as high
as at present. The more reasonable trade unionists
are disposed to accept this view on the assumption
that the employers are willing to accept a corre-
sponding reduction in profits. But the extremists
refuse to accept any lowering of existing standards
of wages without a struggle.

Now, from the point of view of formal Socialist
2 17

18 GUILDS, TRADE AND AGRICULTURE

theory, the extremists who refuse to consider a
reduction in wages are in the right. If the rela-
tions of Capital and Labour are the mechanical
ones postulated of Socialist theory the workers
are justified in demanding that they shall enjoy
a permanent increase in wages. Nor can there
be any doubt whatsoever that they are ultimately
in the right. If it was possible in the fifteenth
century for the town worker to be paid a wage
that worked out six or seven times the cost of his
board and the agricultural worker twro-thirds of
this amount,1 it is on the face of things extra-
ordinary that with our enormously increased
productivity it should yet be impossible to pay
the workers a wage which covers little more than
bare necessities. Yet a close examination reveals
the fact that the present system of industry is
so wasteful and built up on a basis so false that
it cannot be made to pay the wages that the
workers are theoretically justified in demanding.
It is apparent that the increases cannot come in
the particular way Labour expects or by their

1 The wages of the artisan during the period to which
I refer (the fifteenth century) were generally, and through
the year, about 6d. per day. Those of the agricultural
labourers were about 4d. I am referring to ordinary
artisans and ordinary workers. ... It is plain the day
was one of eight hours. . . . Sometimes the labourer is
paid for every day in the year, though it is certain he
did not work on Sundays and principal holidays. Very
often the labourer is fed. In this case, the cost of main-
tenance is put down at from 6d. to 8d. a week. Food
was so abundant and cheap that it was sometimes thrown
in with the wages (Six Centuries of Work and Wages,
by J. E. Thorold Rogers, pp. 327-8).

ON WAGES AND FOREIGN TRADE 19

particular methods. It is not in the nature of
things. Industry as it exists to-day in our great
industrial centres is dependent upon foreign trade,
and so long as it is so dependent it will be necessary
to compete. Except, therefore, where we enjoy
some monopoly or other artificial advantage, we
shall only be able to compete successfully by
producing as cheaply as possible, and that involves
lower wages than were paid during the war. There
is no getting away from this. If we are to remain
an industrial competing nation, the workers must
be prepared to accept such wages as will enable
our manufacturers to compete successfully.1 If
they are not satisfied with so little — and there is
no reason why they should be — the present
system must be changed.

It is here we come to the popular Socialist
fallacy. The present system is not changed
merely by changing its ownership, since if the
workers succeeded in getting possession of industry
to-morrow they would be subject to the same

1 What I say here must not be interpreted as giving any
countenance to the indiscriminate reduction of wages that
has begun to take place since these words were written.
Where high wages are demonstrably the cause of stagna-
tion in an industry, as in many cases there is every reason
to believe they are, they must be reduced to get the
machine going again. But it seems that the original idea
of taking something off the highest wages corresponding to
the lowering of the cost of living is being used as an excuse
for reducing the wages of the lowest paid workers, because
such workers, being unorganized, are defenceless. Not
only is this inhuman, but it is uneconomic. The fallacy
involved in such reductions is exposed in the concluding
paragraph of the next chapter.

20 GUILDS, TRADE AND AGRICULTURE

economic laws to which employers are subject
to-day, and they would be compelled to act much
in the same way because they would be required
to run the same machine. But if we wish to
change the system we must recognize the necessity
for industry to become as far as possible inde-
pendent of foreign markets. This involves the
revival of agriculture, for only by such means
can the home markets be restored. In so far as
industry could depend upon the home markets,
we should be able to exercise control over the
conditions of industry, and real fundamental
changes in the position of the workers could be
introduced. But it is vain to suppose that any
such change can be introduced so long as industry
rests on the economic quicksand of foreign markets.
It becomes apparent therefore that if the position
of the workers is to be improved they must take
longer views. There is no such thing as " Socialism
now." But there is such a thing as Socialism in
ten years' time if the workers could be persuaded
to follow a consistent policy over such a period
of time. The trouble is that the workers, as
indeed most people in every class, think of the
social problem in the terms of their own jobs.
The engineer wants a solution in the terms of
engineering ; the bootmaker in the terms of boots ;
the clerk in the terms of clerking. It is natural,
perhaps, but none the less impossible, for it dis-
regards the action of those world-wide economic
forces which dominate all nations in proportion
as they become dependent upon foreign trade.
I said that if the position of the workers is to

ON WAGES AND FOREIGN TRADE 21

be improved they must take longer views. It is
clear that modern industrial activities are essen-
tially transitory in their nature. Quite apart
from the war, it is manifest that sooner or later
the situation that exists to-day must have arisen,
for the existing arrangement whereby goods are
produced at one end of the earth and food at the
other does not possess within itself the elements
of permanence. It owes its existence to many
things, but by far the most important to the
fact that we were the first to employ machinery
in production. This virtual monopoly that we
had for so long encouraged the growth of cross-
distribution. But it is uneconomic and therefore
cannot last, for it is apparent that other things
being equal, it must be cheaper to produce goods
near the markets than at a distance from them.
An arrangement may be uneconomic, but custom
and inertia will combine to perpetuate it long
after the circumstances which brought it into
existence have disappeared. The war woke up
many of our former customers to this fact. Before
the war they were content to produce food and
raw materials, and relied upon us in the main
for their manufactured goods. During the war
we could not supply their wants, and they took
to manufacturing all kinds of things for them-
selves. As these manufactures are carried on
near to where the raw materials are found or
produced, it is manifest that we cannot hope to
recover these markets. They must gradually slip
from our hands. We cannot expect to export
in the future such large quantities of manufac-

22 GUILDS, TRADE AND AGRICULTURE

tured goods to Australia, Canada, South America
and elsewhere as hitherto. Meanwhile, in order
to finance the war, we disposed of most of our
foreign investments. The result of it all is that
our industries will be unable to provide work for
such numbers as hitherto. Not being able to sell
goods to the food-producing nations, we shall
soon be without the money to pay for the food
we must import to keep our population alive — a
fact that is brought home to us by the constant
falling of the rate of exchange.

It appears therefore that though the reversal
of our Russian policy, the complete removal of
blockades and the provision of credits for the
restoration of European trade would relieve the
unemployed problem, it cannot hope to solve it,
since a wider view of the situation leads to the
conclusion that such relief can only be temporary.
The renewal of trade facilities with Russia and
Central Europe might relieve the congested state
xof the home market, but it will not provide us
with the wherewithal to buy food, because Europe
has no food to give us in exchange for our goods.
If food is to be obtained, we must give something
in exchange to the countries which produce it or
we must produce it for ourselves. And as those
countries upon which we have been accustomed to
rely for a supply of food are beginning to produce
their industrial wares for themselves, it follows
that the only way to meet the situation is to
take measures to produce as much food as possible
for ourselves by the revival of agriculture. By
no other means can the balance of exchange be

ON WAGES AND FOREIGN TRADE 23

restored. Agriculture is fundamental, since the
price of food determines the cost of everything
else. If therefore we neglect to revive agriculture,
we shall be exploited by the countries who do
produce food, and this, by raising the price of our
manufactures, will in turn increase our difficulties
in competing in other markets. It is insufficiently
recognized that during the war the agricultural
populations all over the world have been becoming
rich while the industrial ones have become poor.
It is not improbable therefore that capitalism,
declining in the towns, may rehabilitate itself
through agriculture. It certainly will do so unless
Socialists are very much more wide awake than
they have hitherto been.

Though at the moment the change which we
are required to make will be difficult and incon-
venient to the people affected, it will, if taken in
hand with resolution, prove undoubtedly to be
a blessing, for our society is top heavy, and the
revival of agriculture is a movement in the direction
of a return to the normal. But even with agri-
culture revived it is questionable whether we shall
in the long run be able to support our present
population. In so far as this is true, there is
only one remedy, and that is emigration. And
here the real trouble begins. Emigration has so
often been advocated as an excuse for postponing
reforms at home that a natural and justifiable
suspicion attaches to any one who advocates it,
as Mr. Lloyd George found out recently when he
suggested it as a remedy for unemployment.
But it was not only with critics at home that he

24 GUILDS, TRADE AND AGRICULTURE

had to contend. The Dominions themselves lost
no time in announcing that they had unemployed
problems of their own and therefore could not
assume responsibility for ours. And there the
matter was allowed to drop. Nevertheless I am
persuaded that emigration is a necessary part of
the solution of our problem, and by one means
or another it must be rendered practicable. That
England, having sold her foreign investments and
lost her oversea markets, cannot hope even with
agriculture revived to support her present popu-
lation is demonstrable beyond doubt. But that
our Dominions, with their vast empty spaces of
fertile land that can produce the food and supply
the raw materials of industry, cannot find room
for our surplus population is a paradox — a paradox
moreover that needs to be explained, since it is
impossible to deny that such is the situation in
our colonies to-day. It suggests the question :
Why does our economic system produce such
contradictory results ? What is it that has got
such a strangle-hold upon all modern industrial
nations ?

Ill

THE TYRANNY OF BIG BUSINESS

I CONCLUDED the last chapter by asking what it
was in the economic system of industrial nations
that had got such a strangle-hold upon them.

The usual answer is of course to ascribe the
general paralysis to the economic reactions that
followed the war. In the immediate sense this
is partially true. But of itself it is an insufficient
explanation, for it is evident that the disease
existed and was rapidly developing before the
war. Let us therefore begin our inquiry by
focusing our attention upon a most evident
symptom and consider the widespread tyranny
of big business. The success of these large organi-
zations has been so dazzling that they have almost
succeeded in silencing critics as to the ultimate
validity of their activities. They have claimed to
be the last word in efficiency, and to be justified
as evidence of the survival of the fittest. For
most people this has been a sufficient apology,
and they have inquired no further. But we are
unwilling to accept them at their own valuation,
since we are persuaded that in them and their
methods the immediate cause of the paralysis that
is overtaking industry is to be discovered.

26

26 GUILDS, TRADE AND AGRICULTURE

It will not be denied that expansion is to our
industrial system the breath of life. So long as
the system could continue expanding, it worked
in spite of its shortcomings and injustices. But
our economic system is so fearfully and wonder-
fully made that it cannot remain stationary.
Once the limit of expansion is reached, contraction
sets in, and with it all manner of internal com-
plications begin to make their appearance. The
honour of placing a limit to this process of expan-
sion belongs to large financial and industrial
organizations which have overreached themselves.
So keen have they been on making money that
they have ignored all other considerations, and
for a generation they have been at work under-
mining the very foundations on which their
prosperity ultimately rested. The changed position
of the pioneer since big business got under way
will bring this point home. The pioneer is the
advance guard of civilization. He goes out into
uninhabited places, he clears the land, and it is
by means of his conquests that the area of civiliza-
tion is extended. That he should continue his
work is necessary for the continuance of our
civilization ; for, as I have already said, expansion
is to it the breath of life. And how has big business
treated the pioneer ? The answer is, it has simply
strangled him. The pioneer is isolated. He is
dependent upon dealers for his supplies and for
the marketing of his produce. In the old days
of colonial expansion there were many such com-
peting dealers, and this fact ensured him favourable
terms ; but a time came when big business got

THE TYRANNY OF BIG BUSINESS 27

the upper hand. And then tilings changed. The
pioneer found himself at the mercy of some trust
or syndicate that was in a position to bleed him
white and did not hesitate to do so. When news
was noised abroad of the treatment to which
those who went on the land in the colonies were
subjected, no new men ventured. They no longer
went forth with the proverbial half a crown in
their pockets to embark upon some new enterprise
with a feeling of assurance and confidence. For
they began to realize that they had not a dog's
chance of success. It was thus that the initiative
and enterprise that made our colonies was strangled.
The age of expansion came to an end and our
colonies began to develop their own unemployed
problems. That is why nowadays they have no
place for the emigrant. Contraction has set in.

A generation ago it was the custom to belaud
these large organizations ; to assume that because
they were successful they represented a higher
form of industrial organization ; and, on the
grounds of the necessities of social evolution, to
condone the immorality of their methods as in-
evitable in a time of transition. It was supposed
that by suppressing competition they were laying
the foundations of the communal civilization of
the future, and that when their great work of
amalgamation and centralization was completed
they would pass into the hands of the people.
To-day we realize that this was a vain delusion.
We no longer justify them as the fittest to survive.
We have begun to ask the question as to whether
they can survive at all. For they have been too

28 GUILDS, TRADE AND AGRICULTURE

short-sighted to make any provision for the
future. Systems of organizations that have en-
dured in the past were always careful to see that
a ladder existed whereby the coming generation
could rise step by step until they reached the
summit of their callings. By such means these
organizations renewed themselves. With such an
eye to the future the Mediaeval Guilds jealously
guarded the position of the apprentice. Appren-
ticeship was " an integral element in the con-
stitution of the craft guilds, because in no other
way was it possible to ensure the permanency of
practice and continuity of tradition whereby alone
the regulations of the guilds for honourable dealing
and sound workmanship could be carried on from
generation to generation."1 And this principle
was not only understood by the craftsmen, but it
was understood by the merchants in the past
who, we read, were accustomed to sneer at the
East India Company because it could not " breed
up " merchants of initiative and independence.
And this feeling against joint-stock enterprises
continued until the middle of last century, when
it yielded at last to the force of circumstances
consequent upon the industrial revolution, and
the principle of limited liability became admitted
in law.2

The evil inherent in joint-stock companies was
not fatal to them at first, since before the acknow-

1 An introduction to the Economic History of England,
by E. Lipson, pp. 282-3.

* See chapter on Limited Liability Companies in my
A Guildman's Interpretation of History.

THE TYRANNY OF BIG BUSINESS 29

ledgment of the principle of limited liability in
law they were few and far between, and so it became
possible for them to renew their organization,
wherever it was defective, by recruiting from
outside their ranks. But once they become
general, the evil inherent in them rapidly devel-
oped ; for it soon became apparent that the
divorce of ownership from management upon
which they were based brought into existence
horizontal and class divisions between those in
their employ ; and this spread disaffection every-
where. For men began to find that their future
depended less on themselves than on the attitude
of their immediate superiors towards them. In
the higher ranks, these circumstances led to those
jealousies and feuds by which all large organiza-
tions are distracted. In the lower ones it led to
apathy and indifference ; for when large organiza-
tions took away liberty from the individual they
took away from him all living interest in his work.
The effect of it all has been the destruction of the
sense of responsibility. This results in a loss of
efficiency. Expenses go up and up, and there
seems to be no stopping them. Recourse is had
to amalgamations. But it is all of no avail ; for
the soul has gone out of the body and there is
no restoring it.

There is no restoring the morale of these large
organizations, because they have succeeded in
destroying confidence and goodwill everywhere
by the short-sightedness of their policy. For not
only are limited companies responsible for the
flood of commercial dishonesty and legalized fraud

30 GUILDS, TRADE AND AGRICULTURE

that have simply overwhelmed modern society,
but under their aegis Labour has become more
and more embittered. It is widely recognized
nowadays that the mass of men have no dis-
position to do any more work than they can help.
This is in the main due to these large organizations
which lead men to feel that not they but others
are going to profit by their labour. So long as
competence was rewarded and honour appreciated
there was an incentive for men to work. If they
became efficient they might get on to their own
feet, and the presence of a number of men with
such ambitions in industry gave a certain moral
tone to it that reacted upon others. But when,
owing to the spread of limited companies, all
such hopes were definitely removed ; when technical
ability, however great, went unrecognized and
unrewarded, and proficiency in any department
of industry incurred the jealousy of " duds " in
high places, demoralization set in. All the old
incentives were gone, and no one was left to set
a standard. The suppressed impulses of men
whose ambitions were thwarted turned into de-
structive channels. The rising generation, feeling
themselves the defenceless victims of exploitation,
are in open rebellion. They refuse any longer to
make profits for others, and this refusal is accom-
panied by a spirit that is anything but conciliatory.
There is, I am persuaded, a close connection
between the spread of Bolshevism and the ex-
ploitation of the young. The hopeless position in
which they find themselves, without prospects of
any kind, is largely responsible for their uncom-

THE TYRANNY OF BIG BUSINESS :;i

promising temper and a certain impatience and
ruthlessness that disregards circumstances. It is
insufficiently recognized that Bolshevism here is
in no small degree a rising of the younger generation
against the old. Can we wonder ?

While on the one hand big business finds itself
threatened by the disaffection of the workers,
on the other it is perplexed by the contradictions
of its own finance. The faith of financiers has
hitherto been placed in reducing the costs of
production. It was assumed that any reduction
of costs would be automatically followed by an
increase of demand. But is this so ? Such a
policy is no doubt a sound business proposition
from the point of view of the individual capitalist
who is anxious to find ways and means of increasing
his market. But it has obvious limitations when
applied generally. To the individual capitalist
bent on increasing his market it matters nothing
how the costs of production are reduced. But
when generally applied it makes all the difference
in the world whether such reductions are effected
by improved methods of production or by lowering
wages. For the latter method, by reducing pur-
chasing power, undermines demand. We see
therefore that demand does not depend ultimately
upon a reduction of costs, but on the distribution
of wealth. In so far therefore as big business
sets about to centralize wealth it undermines
demand. But again, in so far as increased pro-
duction is necessary to maintain its financial
stability, there is necessitated an increased demand.
We see then that to seek to centralize wealth and

32 GUILDS, TRADE AND AGRICULTURE

to increase production is to travel in opposite
directions at the same time ; for while centralization
of wealth tends to undermine demand, increased
production presupposes increased demand. Can
we wonder that a deadlock has overtaken in-
dustry ? The immediate cause may be the war,
but it is clear that the problem is far more funda-
mental, and that the deadlock would have arrived
quite apart from the war. Like political despots
our commercial magnates are beginning to find
that the successes of despotism exhaust its re-
sources and mortgage its future.

IV
ON INVESTING AND SPENDING

CONSIDERING the anti-climax in which big busi;
is seen to be ending, the question arises : What is
it that has impelled it on such a fatal course ?

With the individuals immediately concerned,
love of money, power and personal ambition has
doubtless been the mainspring of their activity.
But it is a mistake to attribute too much to purely
personal influences, inasmuch as such men are the
instruments rather than the cause of develop-
ments. Their freedom of choice can be exercised
only within certain well-defined limits. Those
limits are determined by the current ideas and
practice of finance, to which all their activities
must have reference. To understand therefore
the cause of the deadlock that is overtaking
industry, we must inquire into those principles
of finance which are accepted by all who engage
in commercial activities.

In this connection it may be held that there is
a sense in which it is true to say that the City
has been the victim of a false economic philosophy.
For though the principles of that philosophy have
on the whole followed and justified economic

3 »

34 GUILDS, TRADE AND AGRICULTURE

practice rather than directed it, yet there can be
little doubt that commercial men would not have
embarked upon their latter-day enterprises with
such abandon and self-confidence had they not
believed that they were supported by the thought
of the age. And indeed, apart from Ruskin and
his followers, who were comparatively few in
number, the thought of the age did on the whole,
until a few years before the war, support the City
in its doings. Collectivists objected to the pro-
ceeds of industry going into the pockets of a few,
but they accepted the principles governing City
finance. They did not perceive that apart from
the way the earnings of industry were distributed
there was anything fundamentally wrong in these
principles of finance. Yet that there must be
something very fundamentally wrong needs no
demonstration to-day. Big business is too mani-
festly breaking down to be able to justify itself
any longer.

Ultimately of course what is wrong is the modern
philosophy of life, with its worship of wealth —
its belief that the acquisition of money precedes
the attainment of all other good things in this
universe. But to change these values (and they
must be changed) is the work of time, and we
are unfortunately faced with immediate issues,
the legacy of generations of false philosophy.
To deal with them it is necessary to know the
proximate cause of things, and the proximate
cause of the activities of big business is un-
doubtedly the theory of investments as popularly
understood. That theory teaches that money is

ON INVESTING AND SPENDING :*5

never so usefully employed as when it is invested
in some productive enterprise, and it recogij
no limit to the possibility of such investments.
Nearly all people with money accept this theory
as a truth that is axiomatic, and consider them-
selves as doing a positive service to the community
when they reinvest any spare money they may
have for further increase instead of spending it
in some way or other. For, as they are accustomed
to say, money so invested provides employment.

This is the philosophy of the rich to-day. If
we went back a couple of generations to the old
Tory school we should find that they believed it
was not the investing but the spending of money
that gave employment. Though neither of thc.->e
conflicting philosophies is ultimately true, the old
Tory idea is infinitely nearer the truth than the
current one ; while as a practical working philosophy
for the rich there is simply no comparison between
the two. For whereas money spent does return
into general circulation, the effect of investing and
reinvesting surplus money is in the long run to
withdraw it from circulation, much in the same
way as if it were hoarded. Nay, it is actually
worse than if it were hoarded. Hoarded money
may undermine demand, but it does not increase
supply, whereas when reinvestment proceeds
beyond a certain point it increases supply and
undermines demand at the same time.

It is apparent that in a society in which economic
conditions were stable a balance between demand
and supply would be maintained. The money
made by trade would be spent, and in this way

36 GUILDS, TRADE AND AGRICULTURE

it would return into general circulation. Thus a
reciprocal relationship would be maintained be-
tween demand and supply. In former times
money was spent upon such things as architecture,
the patronage of arts and letters, the endowment
of religion, education, charitable institutions, and
such-like ways. Expenditure upon such things
stimulated demand and created employment,
while it tended to bridge the gulf between rich
and poor. The only defence that is ever made
for the existence of a wealthy class in society is
that but for their expenditure in such ways our
great monuments of architecture, educational and
other endowments would never have come into
existence. I am not quite sure how far this is
true. But it is manifest that when the rich did
dispose of their wealth in such public ways they
were in a position that could be defended on
the grounds of expediency if not of equity. But
what defence can be put up for the rich to-day
who have so completely lost all idea of function
as to be unwilling to spend at all except upon
themselves ; who fail to support charitable insti-
tutions ; who are so inaccessible to culture as to
neglect the patronage of arts and letters ; who
so lack confidence in their own judgment as to
be unable to patronize the crafts of to-day and
take refuge in antiques ; who are unwilling to
spend money upon architecture, nay, who can only
be persuaded to buy pictures when assured they
are good investments — in a word, who have no
idea what to do with their surplus wealth except
to reinvest it for further increase, that is to use

ON INVESTING AND SPENDING 37

it for the purpose of undermining the economic
system that permits them to live such useless
existences. But perhaps they know best !

This is no exaggeration. The misuse of surplus
wealth by the rich upsets the balance between
demand and supply. And this is productive of
waste. For when more money is invested in any
industry than is required for its proper conduct,
the pressure of competition is increased ; for any
increase in the pressure of competition means
that money that should be spent is invested
to increase supply ; and this increases the selling
costs by encouraging the growth of the number
of middlemen who levy toll upon industry,
while it increases the expenditure on advertise-
ments and other overhead charges. Thus we see
it transfers labour from useful to useless work.
Further, it encourages the over-capitalization of
industry by burdening industry with a dead load
of watered capital. These things react to raise
the price of commodities on the one hand and to
demoralize production on the other. For in the
effort to produce dividends on this watered capital
all moral scruples are thrown overboard. Thus
we see there is a direct connection between the
perpetual reinvestment of surplus money for
further increase and the unscrupulous methods of
big business. Once an industry has experienced
a boom on the Stock Exchange, its doom is sealed.
It becomes grossly over-capitalized, and every
kind of dirty trick and smart practice is resorted
to in the attempt to produce dividends on the
watered capital. Attempts are invariably made

38 GUILDS, TRADE AND AGRICULTURE

to squeeze more out of labour. The disaffection
of labour to-day is in no small measure the reaction
against this kind of thing.

In former times the rich appeared to have
some notion that there was such a thing as a limit
to the possibilities of compound interest. But
after the introduction of machinery the possibilities
of making money increased so enormously as to
remove from their minds any sense of limitations.
In demanding that all money shall bear com-
pound interest, finance is committed to an abso-
lutely impossible principle ; as must be apparent
to any one who reflects on the famous arithmetical
calculation that a halfpenny put out to five per
cent, compound interest on the first day of the
Christian era would by now amount to more
money than the earth could contain. This calcu-
lation clearly demonstrates that there is such a
thing as a limit to the possibilities of compound
interest ; yet what we call " sound finance " to-day
proceeds upon the assumption that there is no
limit. In consequence, it invests and reinvests
surplus wealth and loads industry with a burden
it cannot bear. For if wages were reduced to the
lowest figure capable of keeping body and soul
together and prices raised to the highest limit,
productive industry could not be made to yield
the returns which the conventional system of
invested funds now requires. Can we wonder that
capitalism is breaking down ?

ON PRODUCING MORE AND CONSUMING

LESS

0

THE development of foreign trade was a primary
cause in leading the rich to abandon their habit
of spending their surplus wealth in public ways
and to invest and reinvest it for the purpose of
further increase. The discovery of America and
the sea route to India transferred prosperity
from the Hanseatic and other inland towns to
seaports and countries with a good seaboard.
The change was very profitable to English mer-.
chants, who began to secure a larger share of the
commerce of the world. Moreover, it stimulated
British industries, and the rich began to find
increasing opportunities for profitable investment.
These changes were accompanied by certain
changes in economic thought. In the seventeenth
century there arose the Mercantile school of
economists whose central idea was to increase the
wealth of the nation by foreign trade ; and as a
means towards this end they taught that the rule
to follow was " to sell more to strangers yearly
than we consume of theirs in value." Translated
into the terms of industry this doctrine becomes

39

40 GUILDS, TRADE AND AGRICULTURE

that of " producing more and consuming less."
By following this advice, money was made, and
in the terms of cash men became wealthy. But
unfortunately this was not the only consequence,
for this policy brought into existence the problem
of surplus production. This surplus was in the
first instance deliberately created in order to take
advantage of the opportunities of making money
that the exploitation of distant markets afforded.
But after machinery was invented, it became the
plague of our society, for surplus goods increased
so enormously in volume that it became a matter
of life and death with us to find markets in which
to dispose of our goods. For, as a consequence
of this money-making policy our society has
become economically so constituted that we cannot
live merely by producing what we need, but must
produce all manner of unnecessary things in order
that we may have the money to buy the necessary
things, of which we produce too little.

But the evil does not end with ourselves. In
the long run, this policy defeats its own ends.
It is obviously impossible as a world policy because
all the nations cannot be increasing their production
and decreasing their consumption at the same
time. The thing is simply impossible. Hence it
came about that once the employment of machinery
began to give us an unfair advantage in exchange,
one nation after another was drawn into the
whirlpool of industrial production. And in pro-
portion as this came about we were driven further
and further afield in the search for markets, until
a day came at last when there were no new markets

PRODUCING MORE, CONSUMING LESS 41

left to exploit. When that point was reached
competition became fiercer and fiercer, until the
breaking-point arrived and war was precipitated.
The crisis came in Germany. Immediately it
is to be traced to the Balkan War, which closed
the Balkan markets to her, and to the fact that
after the Agadir crisis in 1911 the French capi-
talists withdrew their loans from Germany, and
these things combined to bring the German
financial system into a state of bankruptcy ; for
this system, built upon an inverted pyramid of
credit, could not for long bear the strain of adverse
conditions. But the ultimate reason why the
crisis made its appearance first in Germany was
undoubtedly due to the fact that more than any
other nation she had forced the pace of com-
petition. In the fifteen years before the war
Germany had quadrupled her output. The rate
of productivity, due to never-slackening energy,
technique and scientific development, was far out-
stripping the rate of demand, and there was no
stopping, for production was no longer controlled
by de/nand but by plant. In consequence, a day
came when all the world that would take German-
made goods was choked to the lips. Economic
difficulties appeared, and then the Prussian
doctrine of force spread with alarming rapidity.
War was decided upon for the purpose of relieving
the pressure of competition by forcing goods
upon other markets, and to cheapen production
by getting control of additional sources of raw
material. Hence the demand for colonial expan-
sion, the destruction of the towns and industries

42 GUILDS, TRADE AND AGRICULTURE

of Belgium and Northern France, and the whole-
sale destruction of shipping by the submarine
campaign. They all had one object in view :
to relieve the pressure of competition and to get
more elbow-room for German industries. The
idea of relieving the pressure of competition by
such commercial sabotage was not a new one.
It had been employed by Rome when she destroyed
Carthage and Corinth and the vineyards and olive
groves in Gaul out of commercial rivalry. The
Germans, who copied the methods of the Romans
in so many ways, followed them also here.

Had Germany succeeded in bringing the war to
an early conclusion, it is possible that this policy
would have been successful to the extent of giving
her industries a temporary relief from the pressure
of competition. But instead of being terminated
in a few months as she had intended, the war
dragged on for over four years, and this exhausted
the economic resources of Europe. When the
Armistice was signed there was a world shortage
of the necessaries of life and it became necessary,
if Europe was not to disintegrate economically,
that efforts should be made to resume at once
normal trade relationships. But unfortunately
the Big Four into whose hands arrangements for
Peace had fallen, were not, as Mr. Keynes has
told us, interested in economics. What they were
interested in was military guarantees against a
renewal of hostilities, territorial questions and
indemnities. And so it came about that the
realities of the economic situation, the urgency of
which permitted no delay, were entirely disre-

PRODUCING MORE, CONSUMING LESS 43

garded. For while on the one hand the Peace
terms ignored the fact that the war had left <
many in a state of economic exhaustion, and that
therefore she could only pay indemnities on the
c'issumption that she experienced a trade revival ;
on the other hand the huge figures at which the
indemnities were fixed, and the continuance of
the blockade, by interfering with the operations
of normal economic forces, precluded the possi-
bility of any such revival.

Meanwhile, unmindful that the war had been
precipitated by the fact that the industrial system
had reached its maximum of expansion, the
doctrine was preached in this country that salva-
tion was to be found in a policy of maximum
production. That the world shortage of the
necessaries of life demanded that efforts should
be made to make good the deficiency, no one will
be found to deny, for in many directions making
good the deficiency was a race against tinu .
But the advocates of a policy of maximum pro-
duction were as little concerned as the Peace
Conference with the realities of the economic
situation. They were not interested in the in-
creased production of food, or finally in any other
form of necessary production, but in finding ways
and means of repaying the War Loan without
resort to a capital levy. And this is where they
went astray. For not only was Labour alienated
inasmuch as it saw in this policy an attempt to
shift the burden of war taxation on to the shoulders
of the producers, but it led its advocates to demand
the increased production of everything and any-

44 GUILDS, TRADE AND AGRICULTURE

thing regardless of the fact that the policy of the
Peace Conference both in regard to Russia and to
Central Europe was to close their markets to
us, and that during the war other nations deprived
of their accustomed supplies from us had taken
to manufacturing for themselves. The result has
been what various writers on economics foresaw —
that indiscriminate production was followed by a
glut, and the unemployed are on our streets.

To add to the public bewilderment, the cry has
gone up of late that the needs of national economy
demand that we consume less ; and the average
man is a little concerned to know what is meant
when he is urged to produce more and to consume
less. The answer is that, absurd and contra-
dictory as it sounds, it is nevertheless the principle
upon which our glorious civilization has been
built. It is a principle with four hundred years
of history to support it, but at last the limits of
industrial expansion necessary to its continuance
have been reached. For, as I have said before,
our economic system must either be expanding or
contracting. And as it so happens that as the age
of expansion has come to an end, the age of con-
traction naturally follows. The Government, im-
pervious to arguments, has at length had to yield
to the force of facts. It has ceased to admonish
all and sundry to increase their production, and
the word has gone round to reduce production
and ration employment, and for each man to work
fewer hours ; for the opinion in the commercial
world to-day is that less production rather than
more is the remedy for our present difficulties.

PRODUCING MORE, CONSUMING LESS i:>

Though there may probably be temporary
revivals of trade, the process of contraction now
definitely inaugurated will, I am persuaded, con-
tinue. For just as hitherto the normal trend of
affairs was, in spite of recurring depressions, from
expansion to expansion, so now when the tide
has turned the normal trend will be from con-
traction to contraction — a tendency that can only
be checked by a complete change in the spirit
and conduct of industry such as is involved in
return to fundamentals. This truth is vaguely
apprehended to-day, though at the moment men
are at a loss to know how to translate it into the
terms of actuality. But now when disillusionment
has overtaken society there is a prospect that right
reasoning may prevail and a path be found. Let
us try to discover it.

VI
FIXED PRICES VERSUS SPECULATION

WE have seen that the existing system of industry
and finance is rapidly reaching a deadlock. What
is to be done in the circumstances ?

The first thing to do is to effect such repairs of
the old machine as will enable it to run a little
longer in order to gain time to build the new one,
which we must have in running order before the
existing machine breaks down completely. For
such a purpose such measures as the reversal of
our Russian policy, the removal of all blockades,
and the provision of credits for the renewal of
trade with Central Europe are indispensable. It
will be unnecessary for me to do more than mention
them, as steps towards their fulfilment have
already been taken. But it is necessary to insist
that though these measures may bring relief by
enabling our merchants to dispose of their surplus
stocks, yet the relief would only be temporary,
inasmuch as if the Continental nations get on
their feet again they will begin to compete with
us in other markets. If on the contrary they
do not recover their industrial position but relapse
into more primitive conditions, they will not

46

FIXED PRICES VERSUS SPECULATION 17

have sufficient surplus to enable them to buy
our manufactures. If these facts were clearly
recognized and the necessary measures taken
in hand, then we should have nothing to fear.
But the danger is that the moment any improve-
ment in trade is felt we shall stop thinking and
pursue the silly old game, comforting ourselves
with the illusion that the dislocation of trade
was due entirely to the war, and that there is
nothing organically wrong with the industrial
system.

The truth, however, must be faced. We are
in an economic cul-de-sac, and there is but one
path of escape ; and that is to get back somehow
to the primary realities of life. It must be
recognized that we are up against the consequences
of centuries of injustice, usury, and Machiavellian-
ism in politics and business, and that there is
finally no escape except to return to the principles
af justice, honesty and fair dealing, upon which
all civilizations rest.

Reduced to its simplest terms, the change
necessary to enable society to escape from the
deadlock that is threatening industry is con-
veniently expressed in the well-known formula : —
" the substitution of production for profit by
production for use " ; and the first step in that
direction will be taken when we begin to establish
a system of fixed prices throughout industry.
For though the Just Price rather than the fixed
price is the ideal to be attained, yet it can only
be realized by stages. The fixed price therefore
is to be regarded as a step towards the Just Price,

48 GUILDS, TRADE AND AGRICULTURE

because the people will never be satisfied with a
fixed price that is not a Just Price.

The difference between a fixed price and the
Just Price almost explains itself. Fixed prices
are those that are unitorm and are not determined
by competition ; but such prices may be anything
but just, as many fixed prices during the war
were anything but just. A Just Price would
bear a certain definite relationship to the cost of
production, measured in labour units. It would
mean that some things would be sold for more
and other things for less than at present. In
the case of a few useful and necessary things it
might mean that they would be sold for more
than at present, because useful labour is invariably
underpaid ; while it so happens that they are
often sold by retail dealers with little or no profit
in order to attract customers, and provide oppor-
tunities for selling other goods, generally useless
and unnecessary things, that carry a handsome
profit. It will be necessary therefore, if pro-
duction for profit is to give way to production
for use, to readjust all such selling prices so that
the price in each case may correspond to the
actual cost of production, since until prices are
so adjusted no change in the motive of industry
is possible. For with prices determined by com-
petition the producer must think primarily in the
terms of profits if he is to remain solvent.

In all kinds of ways the present system of
prices is demoralizing. Some years ago when
I had some experience of the furniture trade, I
made the interesting discovery that it stereotyped

FIXED PRICES rA7i'N//,S SPECULATION 49

the forms of design. It came about this way.
Profits were put on certain things and not on
others. Certain things in general demand, such
as chests of drawers, bureaus, chairs and small
tables were sold without profit, while other things
such as dining tables, bookcases, sideboards,
heavy curtains and carpets carried good profits.
Simpler kinds of furniture were sold at cost price
and sham ornamental pieces at exorbitant ones.
A designer therefore, in the employ of the furnishing
houses, could only exercise his fancy within
certain narrow limits. The furniture had to be
elaborate, and the curtains had to be heavy or
there would be no profits. He might know that
some other arrangement would be infinitely more
effective, but he was not allowed to carry it out,
for in that case the public would not be prepared
to pay a price that would give a working profit,
though to provide such a profit it might only
cost half of what the sham elaborate design cost.
The public would not think they were getting
value for money, and therefore would refuse
to buy. This illustration may serve to show how
unjust prices strangle creative work. They have
strangled the effort to revive design and handi-
craft ; for when conditions obtain which will
not allow men to do things in the way they know
they should be done, they lose interest in their
work and begin to think only of profits.

No doubt many who have had experience of
other trades could add their testimony of the
peculiar effect unjust prices have had. But in
general it may be said that the effect of unjust

4

50 GUILDS, TRADE AND AGRICULTURE

prices is to transfer labour from useful to useless
work, with its corollary that useful work is nearly
always badly paid. The result is that men
insensibly learn that it is easier and more honour-
able to live by exploiting labour for profit or by
trafficking or by money-lending, or by speculating,
or by some parasitic art — by any means in fact
except by doing work which is useful and desirable
for the purposes of human life. It is thus that
occupations have come to be esteemed in proportion
as they win money, afford comfort and leisure,
and confer individual power and distinction. The
effect of it all is to produce social demoralization.
It exalts false social values ; this in turns corrupts
everything else, for it encourages lying and fraud
of every kind, and ends by creating an atmosphere
of social lies so dense that few people know where
they are. Divorced from all useful work they
have no final test of truth. In consequence
they become dissatisfied, they are at the mercy
of every fashion of opinion, and finally like the
builders of Babel they end in a confusion of
tongues, no man being able to make himself
intelligible to any one else.

Thus we see that unfixed and unjust prices
divert energy from production to speculation.
It will remain impossible for people to be interested
in the ultimate social utility of anything they do
so long as the price they are to get for their labour
is settled by competition. The reason why the
commercial motive is for the most part absent
among professional men is precisely because the
price of their services is fixed ; and it will tend to

FIXED PRICES VERSUS SPECULATION 51

disappear from industry once prices are fixed.
The professional man is able to put his best into
his work because he has not to worry about how
much he has to receive for his services, and it will
be the same in industry when the same conditions
obtain.

Uncertainty as to price dislocates industry in
every direction, and has handed production over
to the speculator with consequences that are
grossly demoralizing. It is only possible for a
man to plan ahead if he knows where he stands.
The farmer, for instance, must plan four years
ahead. He must arrange for a rotation of crops.
If he knows he can dispose of his produce at a
certain definite fixed price he can concentrate all
his attention upon getting the best out of his
land. He can go ahead. But if uncertainty as
to price surrounds him on every side he will not
produce on such a large scale, for he will need to
keep a greater reserve of capital in case of need.
Moreover he will have to be for ever thinking
about prices, of when and where to sell, and this
will prevent him from making the best use of his
land. There is no greater illusion than to suppose
that the motive of profit stimulates efficiency.
Only love of work can do that, and nothing detracts
from love of work so much as economic uncertainty.
I am convinced that the decline of quality in
production is due far less to avarice than to the
demoralization that accompanies such uncertainty.

Further, the determination of prices by com-
petition leads inevitably to injustice. In the
event of a shortage the producer exploits the

52 GUILDS, TRADE AND AGRICULTURE

consumer ; in the event of a surplus the consumer
exploits the producer. The producer may be
ruined as English farmers were in the years
1879-90. This ruin has reacted to make living
increasingly expensive for everybody. It is thus
that unfixed prices leads to unrest among the
workers by introducing an element of uncertainty
into the real value of wages. It leads moreover
to disaffection all round. The consumer is in-
dignant when he is exploited by the producer,
and the producer when ruined becomes a centre
of discontent. On the other hand the producer
who has profited by the system hardens his heart
towards the rest of the community because he
believes that they would have done the same as
he has done if they had had the chance. He
therefore resents criticism as a personal injustice.
It is thus that competition in prices ends in the
promotion of class hatred — of enmity between
the haves and the have-nots.

Then again unfixed prices lead to economic
instability. Before the war, because we were
living upon the moral capital of centuries of
tradition and stability, the danger inherent in
allowing prices to be determined by competition
was apparent only to a few, though as a matter
of fact economic conditions every year became
more unstable. But during the war, when restrain-
ing influences were removed, profiteering became
rampant and what hitherto had only been apparent
to a few was seen by the many. It was seen that
no society could endure that allowed prices to be
fixed in this way, inasmuch as it could only end

FIXED PRICES VERSUS SPECULATION 58

by shaking to pieces the economic system itself.
Hence it was that, faced with this peril, the Govern-
ment sought to limit by means of fixed prices the
profits that could be made by any manufacturer
or middleman. After the war, the Government
brought in the Profiteering Act to enable it to
continue to exercise the power of fixing maximum
prices of articles in general use, which fixing
had during the war been done under D.O.R.A.
Its operation, however, was limited to six months,
and since its expiration there has been a return to
the system of competitive prices for such articles,
and prices have begun to fall. Some of the con-
trols, however, that deal with the price of food
and raw material still remain. They exist inde-
pendently of this Act.

It can occasion no surprise that measures that
interfered so much with the ways of business
should be unpopular in the commercial world.
The business man has the conviction that what
is in his personal interest is necessarily in the
interests of the community, since as society lives
by commerce he assumes that anything that
interferes with the liberty of commerce can be
in the interests of nobody. Moreover, to him
speculation is the soul of business, and as any
extension of fixed prices over industry would
put an end to speculation he can see nothing but
demoralization overtaking the world when bu>ine-s
loses its soul. No doubt he is perfectly honest
in believing this. To men who accept business
operations at their face value there is no other
conclusion. The question to us, however, is

54 GUILDS, TRADE AND AGRICULTURE

whether the world does not want another soul quite
different from the one that business affords ;
whether, if the moral tone of industry is ever
to be raised, business as we understand it must
not go, nay, whether business itself can carry on
much longer at all on its present basis.

But it was not only business men who objected.
Socialists and Labour men also objected. But
their objection was of a different order, and was
due to the fact that, having a priori ideas in their
minds as to the way the millennium is to be ushered
in, they look with suspicion upon any idea that
has not hitherto found a place in their programme.
To them the fixation of prices was nothing more
than a means of satisfying popular clamour and
postponing the day of substantial reform, and
for this reason they never seriously considered
it. Perhaps they may, when they awaken to
the fact that it is an idea with potentialities in it
little suspected by its promoters.

But there are other and more valid objections
to the Government's policy of fixed prices. Their
enforcement was accompanied by vexatious and
irritating interferences of all kinds. With this
objection I can entirely sympathize. But I would
point out that it does not invalidate the principle
of fixed prices. What it does invalidate is the
instrument that was used for enforcing them.
That instrument was the bureaucratic machine —
the system of control from without. It is clumsy
and irritating, but the Government had no option
but to use it, for the Guild — the system of control
from within — was non-existent. And the Guild,

FIXED PRICES VERSUS SPECULATION 55

as we shall see later, is the only instrument that
can fix prices properly.

Then there is the objection that certain things
went off the market as soon as prices were fixed.
This again does not invalidate the principle of
fixed prices. What it does do is to demonstrate
the impossibility of enforcing fixed prices against
the will of a trade. Here again the solution is
to be found in the institution of Guilds. For a
Guild would contain everybody who worked in
a trade, not the few people who were in a position
to exploit it, and if everybody in a trade had a
voice in the matter we may be assured that they
would act democratically for the good of all, and
not merely in the interests of a few.

Finally there is the objection of the man-in-
the-street, to whom fixed prices were popular
during the war when they prevented prices going
higher, but who turned against them when the
control prevented them falling to a lower level.
This objection again is valid. But it does not
invalidate the principle of fixed prices. What it
does invalidate is the fixed price that is not a
Just Price ; and as the fixed prices during the
war were not Just Prices, it was desirable that
control should be removed to enable prices to
return to the normal.

VII
GUILDS AND THE JUST PRICE

I CONCLUDED the last chapter by pointing out
that the man-in-the-street does not object to the
principle of a fixed price but to the fixed price
that is not a Just Price. As it happens that the
Just Price was the central economic idea of the
Middle Ages, let us pause to consider what it
meant in those days.

The Just Price in the Middle Ages was primarily
a moral idea. By that I mean that it owed its
establishment to moral rather than to economic
considerations. It was the idea that between
two persons bent on honest and straightforward
dealing it is possible to arrive at something that
may be regarded as a Just Price. Indeed, as a
matter of fact, when this idea pervades the whole
community, as it did at one time in the Middle
Ages, conditions are created that make it a com-
paratively easy matter to translate such a principle
into practice ; for under such circumstances
prices remain more or less stationary, and every
article acquires a traditional price. As a moral
precept, the idea of the Just Price was maintained
by the Church and supported by the words of

56

GUILDS AND THE JUST PRICE 57

the Gospel, ' Whatsoever that men should do
unto you, do ye also unto them." To buy a
thing for less or sell a thing for more than its real
value was considered in itself unallowable and
unjust, and therefore sinful, though exceptional
circumstances might sometimes make it permissible.
The institution of buying and selling wares, it was
held, was introduced for the common advantage,
and this common advantage could only be main-
tained if there was equal advantage to both
parties. Such equality was defeated if the price
which one of the parties received was more or
less than the article sold was worth.

Under the auspices of the Guilds, the Just
Price became a fixed price. Indeed it is true to
say that the Guilds were organized to maintain
the Just Price. For it is only by relating the
Guild regulations to this central idea that they
become intelligible. To maintain the Just and
Fixed Price, the Guilds had to be privileged bodies
having an entire monopoly of their respective
trades over the area of a particular town or city ;
for it was only by the possession of a monopoly
that a fixed price could be maintained, as society
found to its cost when the Guilds lost their
monopolies. Only through the exercise of authority
over its individual members could the Guild
prevent profiteering in its forms of forestalling,
regrating, engrossing and adulteration. Trade
abuses of this kind were ruthlessly suppressed in
the Middle Ages. For the first offence a member
was fined ; the most severe penalty was expulsion
from the Guild, which meant that a man lost the

58 GUILDS, TRADE AND AGRICULTURE

privilege of following his trade in his native
city.

But a Just and Fixed Price cannot be maintained
by moral action alone. If prices are to be fixed
throughout industry, it can only be done on the
assumption that a standard of quality can be
upheld. As a standard of quality cannot finally
be defined in the terms of law, it is necessary for
the maintenance of a standard, to place authority
in the hands of craftmasters a consensus of whose
opinion constitutes the final court of appeal. In
order to ensure a supply of masters it is necessary
to train apprentices, to regulate the size of the
workshop, the hours of labour, the volume of pro-
duction, and so forth ; for only when attention
is given to such matters are workshop conditions
created that are favourable to the production of
masters. Thus we see that all the regulations
— as indeed the whole hierarchy of the Guild —
arise out of the primary object of maintaining
the Just Price.

The Just and Fixed Price when maintained
by the Guilds left no room for the growth of
capitalism by the manipulation of exchange
currency, for it demanded that money should be
restricted to its legitimate use as a medium of
exchange. Unconsciously, the Mediaeval Guilds
stumbled upon the solution of the problem
of currency which had perplexed the lawgivers
of Greece and Rome and broke up their civiliza-
tions, as in these days it is breaking up ours.
The idea is a simple one — so simple in fact that
one wonders how ever it came to be overlooked.

GUILDS AND THE JUST PRICE 59

Currency, or in other words money, is a medium
of exchange. The problem is how to restrict it
to its legitimate use. So long as it is fairly and
honourably used to give value for value ; so
long in fact as money is used merely as a token
for the exchange of goods, then a society will
remain economically stable and healthy. But
unfortunately such a desideratum does not follow
naturally from the unrestricted freedom of
exchange, that is by allowing prices to be deter-
mined by the higgling of the market ; because
under such circumstances there is no equality of
bargaining power. The merchants and middlemen,
because they specialize in market conditions,
find themselves in a position to exploit the
community by speculating in values. Standing
between producers and consumers, they are in
a position to levy tribute from each of them. By
refusing to buy they can compel producers to
sell things to them at less than their real value ;
while by refusing to sell they can compel consumers
to buy things from them at more than their real
value ; and by pocketing the difference they
become rich. The principle remains the same
when the merchant becomes a manufacturer, the
only difference being that the exploitation becomes
then more direct. For whereas as merchant he
exploits the producer indirectly by buying the
product of his labour at too low a cost, in his
capacity as manufacturer he exploits labour direct.
All commercial operations partake of this nature.
Their aim is always to defeat the ends of fair
exchange by manipulating values. By so doing,

60 GUILDS, TRADE AND AGRICULTURE

money is made as we say, and the problem of
riches and poverty is created. It is a bye-pro-
duct of this abuse of exchange. For this evil
there is only one solution — the solution provided
by the Guilds — to fix the price of everything ; for
when all prices are fixed there is no room left for
the speculator. There is nothing to speculate in.
The Guilds in the Middle Ages existed in the
towns. But they never came into existence in
the rural areas. There were no agricultural
Guilds. This was the weak place in the Mediaeval
economic armour ; for it is obvious that if the
Just Price was finally to be maintained at all,
it would have to be maintained everywhere, both
in town and country. That Guilds were never
organized in the rural areas is to be explained
immediately by the fact that in the eleventh and
twelfth centuries, when Guilds were organized in
the towns, currency had not spread into rural
areas, for Feudalism existed there and exchange
was still carried on by barter. But the ultimate
reason is to be found in the fact that the
function that the Guilds performed in the regu-
lation of exchange and currency was not under-
stood at the time, while by the time currency
had spread into rural areas the validity of the
Just Price had come to be challenged by the
lawyers, who maintained the right of every man
to make the best bargain he could for himself.
They found authority for their attitude in the
Justinian Code, belief in the infallibility of which
had accompanied the revival of Roman law. This
challenge undermined the moral sanction on

GUILDS AND THE JUST PRICK 61

which the Just Price ultimately rested. It had
the success of an appeal to a lower motive,, and
it was thus that the revival of Roman law intro-
duced into Mediaeval society those very elements
of corruption with which it had been associated
at Rome. Its ultimate effect has been to re-
produce in the modern world those very same
economic difficulties and social disorders that
paved the way for the break up of the Roman
Empire. For Roman law was not, like Mediaeval
law, designed to enable good men to live among
bad, but to enable rich men to live among poor ;
and as such it had been designed to bolster
up, in the interests of public order rather than
for the maintenance of justice, a society that
had been rendered corrupt by an unregulated
currency.

While the lawyers were blind to the significance
of the Just Price, the Church was equally blind
to the need of Guild organization for its mainten-
ance. It thought, as many religious people think
to-day, that the world can be regenerated by
individual moral action alone. It never realized
that a high standard of commercial morality can
only be maintained if organizations exist to
suppress a lower standard. Hence it came about
that while the Church inculcated the doctrine
of the Just Price in the pulpit, the confessional
and the ecclesiastical courts, it never stressed
the need of organization ; and so the peasants
who accepted such teaching found themselves
eventually at the mercy of those who followed the
teaching of the lawyers. It was thus that the

62 GUILDS, TRADE AND AGRICULTURE

moral sanction of the Just Price lost its hold on
the country population and the way was opened
for the growth of capitalism and speculation.
The moral sanction of the Just Price being under-
mined, the Guilds found it increasingly difficult
to maintain fixed prices. In the sixteenth century
the whole system broke down entirely, as a
consequence of the suppression of the monasteries,
which upset the economic equilibrium of society,
producing widespread unemployment, and the
wholesale importation of gold irom South America,
which doubled prices all over Europe.

So ended the Guilds ; and it is only recently
that we have begun to realize what the world
lost with them. For they fulfilled a function
of fundamental importance to society, since in
maintaining the Just Price they prevented people
from speculating in exchange. With their dis-
appearance society lost entire control over its
economic arrangements, and the world has been
at the mercy of economic forces ever since. It is
no exaggeration to say that society will continue
to be at their mercy until the Guilds are restored,
for by no other means can speculating in exchange
be suppressed. The restoration of the Guilds
therefore provides the key to the economic problem.
The control of prices is a precedent condition
of success in any effort to secure economic reform,
inasmuch as until prices are fixed it will be
impossible to plan or arrange anything that may
not be subsequently upset by the fluctuations of
the market. It is a necessary preliminary to any
securing of the unearned increment for the com-

GUILDS AND THE JUST PRICE 63

munity, since until prices are fixed it will always
be possible for the rich to evade attempts to
reduce their wealth by transferring any taxation
imposed upon them on to the shoulders of other
members of the community.

VIII
HOW THE GREAT CHANGE MAY COME

GRANTED then that it is essential to the solution
of the problems confronting us that prices be
fixed and the Guilds restored, we must try to
answer the question : How is it to be done ?

Here, to some extent, we enter the realm of
uncertainty. The translation of any idea into
the terms of actuality depends upon circumstances,
and as it is impossible to foresee with precision
what will happen in the future, it is impossible
to define exactly every step that must be taken.
On the other hand the popularization and accept-
ance of any idea will, if there is any truth in it,
tend to create the circumstances necessary to
its practical attainment. To some extent, there-
fore, salvation is by faith and propaganda.

But it is not entirely a matter of faith. We
have certain definite things to go upon. We have
unmistakable evidence that " the new social order
is developing its embryo within the womb of
existing society." In the Trade Union movement,
for instance, we have, to use Mr. Chesterton's
words, " a return to the past by men ignorant of
the past, like the subconscious action of some

04

HOW THE GREAT CHANGE MAY COME 65

man who has lost his memory." In which light
the proposal to transform the Unions into Guilds
is seen to be an effort to give conscious direction
to a movement which hitherto has been entirely
instinctive. There is, moreover, historical con-
tinuity in this idea, inasmuch as the Trade Unions
are the legitimate successors of the Mediaeval
Guilds ; not only because the issues which con-
cerned them could not have arisen but for the
defeat of the Guilds, but because they acknowledge
in their organizations a corresponding principle
of growth. The Unions to-day with their elaborate
organizations exercise many of the functions
that were formerly performed by the Guilds — such
as the regulation of wages and hours of labour, in
addition to the more social duty of giving timely
help to the sick and unfortunate. Like the Guilds,
the Unions have grown from small beginnings
until they now control whole trades. Like the
Guilds also, they are not political creations, but
voluntary organizations that have arisen spon-
taneously to protect the weaker members of
society against the oppression of the powerful.
They differ from the Guilds only to the extent
that, not being in possession of industry and
corresponding privileges, they are unable to accept
responsibility for the quality of work done and
to regulate prices. But their performance of
this latter function cannot be withheld much
longer, for the growth of economic instability
and uncertainty is exercising such a paralysing
influence upon the conduct of industry that the
instinct of self-preservation must before long

5

66 GUILDS, TRADE AND AGRICULTURE

compel a return to the idea of a fixed and Just
Price ; and, as we saw that it is impossible to
maintain fixed prices for more than a few staple
articles, by means of bureaucratic control from
without, it follows that any general fixation of
prices is impossible apart from the co-operation
of each trade as a whole. When membership of
a trade organization is confined to employers it
exhibits the vices of a trust. But when it includes
every worker by hand or brain, it will display the
virtues of a Guild. For honesty and fair dealing
will always find the support of the majority.

But how may this necessity be translated into
the terms of practical politics ? The success that
has followed the organization of Building Guilds
in different parts of the country might appear to
suggest that the future is to be found by working
upon such lines. But it is manifest that there
is a limit to such a policy of encroaching control.
The organization of Building Guilds was possible
because of circumstances peculiar to the building
trade, i.e. the housing shortage which provided
the immediate opportunity ; Labour controlled
municipal councils that were in a position to give
them work ; and the fact that in the building
trades the element of fixed capital, so important
in other large industries, is unimportant in com-
parison with the charges connected with each
particular job, — materials and labour entailing
almost the whole costs of the building industry.
These circumstances made the application of the
principle of industrial self-government a fairly
simple proposition. But it obviously could not

HOW THE GREAT CHANGE MAY COME 67

be applied to other large industries where immense
fixed capital is required, and where the market
is not so easily localized.

Considerations of this kind lead me to the
conclusion that the Guilds will arrive some other
way. Recent developments lead me to suppose
that if the change will not be catastrophic it will
at any rate be dramatic, inasmuch as it is possible
that their organization may be encouraged to
stabilize the exchanges. The demand of Labour
that the Government should step in and organize
trade by barter with other nations, in order to
break down the barriers set up by the fluctuations
of exchange, is evidence that thought is moving
in some such direction, for such a departure would
necessitate the organization of Guilds, as the only
way of avoiding the evils consequent upon the
creation of enormous Government departments
to carry through the work. Moreover, except on
a Guild basis it will be impossible to guard against
abuses. For if trade were organized on a basis
of national barter it would be necessary in order
to adjust shares of the industries engaged to put
some price on the outgoing and incoming goods.
If this were left in the hands of Government
officials it would become as scandalous as the
munition contracts were during the war, for the
Government would have to deal with a crowd of
profiteers who would think of nothing except how
to secure advantages for themselves, and the
public outcry and dissatisfaction would be as
great as against the profiteers during the war.
For this problem there is but one solution, and

68 GUILDS, TRADE AND AGRICULTURE

that is for each trade to be organized on a basis
of self-government in order that prices may be
fixed and standards of conduct enforced — or
in other words by the organization of Guilds.
Precedent for such development is to be found in
the later days of the Roman Empire when the
Government, having assumed responsibility for
the provision of an adequate food supply, began
to delegate functions to organized groups of
workers. Our knowledge of what happened in
this way is very scanty, but there is sufficient
evidence to believe that a time came when efforts
were made to balance the centralizing bureaucratic
tendency by decentralization as much as possible,
and that group organization on something re-
sembling a Guild basis came into existence.

Development upon such lines appears to me to
be the probable thing. But. meanwhile our manu-
facturers, who have taken fright at the prospect
of being undersold in the home markets, are
pressing the Government to bring in an Anti-
Dumping Bill as it is called by those who are
opposed to it, or " The Safeguarding of our
Industries Bill," as it is called in Government
circles. The demand is evidently the result of
panic, since as far as I can ascertain the fear of
dumping is largely unsupported by facts. The
Continent is not in a position to export goods in
vast quantities. On the contrary the depreciation
of the exchange that has scared our manufacturers
is itself evidence that the Continent is importing
more than it is exporting,1 and the only remedy

1 From January 1919 to September 1920 we sold to

HOW THE GREAT CHANGE MAY COME 69

is for the Continent to produce more. But if
uv refuse to take their goods it is evident that
their exports will cease and therefore our exports to
them.

It is to be observed that when things go wrong
and people are at a loss to understand the cause,
they invariably seek salvation in the adoption
of a reversal of policy, whether it has anything to
do with the facts or not. Thus because it has
so happened that since the war things have not
automatically adjusted themselves by Free Trade,
they imagine a remedy is to be found in Protection.
But what reason is there to think that this proposed
remedy would not be worse than the disease ?
The application of the principle of Free Trade in
the past regardless of circumstances may be
regrettable. But is a general tariff imposed still
more regardless of circumstances likely to produce
better results ? Free Trade may not contain all
the truth some of its advocates claim. But it
does contain some truth that is valuable in a
period of transition like the present when
exchanges have to be built up again.

The true alternative to Free Trade is not
Protection, but a system of fixed prices under
Guild regulation. To the capitalist demand for
Protection the workers should reply that as it
is undesirable for the State to grant privileges
except to those who are willing to accept corre-
sponding responsibilities, the only terms on which

the war-stricken countries of Europe ^658,750,000 and
only imported ^239, 500,000 worth of goods (Can Our
Industrial System Survive? by J. S. M. Ward, p. 74).

70 GUILDS, TRADE AND AGRICULTURE

they may ask for Protection is that they are
willing to submit to Guild regulation ; which
means that they must agree to sell their goods,
in the home market at any rate, at Fixed and
Just Prices, and that they give the workers a
status in their respective industries. If such
conditions were accepted, the issue between Free
Trade and Protection disappears, and here I would
observe that the function of a Guild is not to
organize industry but to regulate it in the same way
that professional societies to-day enforce a dicipline
among their members. All other issues, such as
whether the members of the Guild should be
organized in self-governing workshops, or whether
they should have small workshops of their own as
happened in the Middle Ages, are secondary.
They are matters of opinion, preference or experi-
ence. But they are not germane to the idea
of a Guild as an organization enforcing a certain
standard of conduct and efficiency over a whole
trade. My own opinion is that under the control
of the Guilds, different forms of workshop organiza-
tion would exist. Men of gregarious instincts
would prefer the self-governing workshop, while
men of a masterful or solitary disposition would
prefer to work alone. But they would all have
to abide by the Guild regulations, or suffer
expulsion. However, these things' are largely a
matter of opinion. If the Guilds are to arrive
dramatically it is manifest that they will have to
adapt themselves to the circumstances that exist.
If we can secure a return to the principles of
honesty and fair dealing, that is all we can expect

HOW THE GREAT CHANGE MAY COME 71

at the beginning. The rest will follow in due
course.

Once the guildization of industry takes place
in one country, the example will speedily be
followed by others. For the problem is inter-
national. All the nations of the earth are having
to face the same problem and learn the same lesson
at the same time. All are engaged together in
the bitter but salutary process of discovering their
souls — some as victors, the others as vanquished.
They are all getting heartily sick of the economic
struggle ; while the rich who hitherto have
obstructed the path of reform are nowadays
on the defensive. We may be assured therefore
that whatever vision is coming to ourselves as a
result of the breakdown of our civilization, similar
visions are coming to others ; and may it not
be that beneath the class hatreds, beneath the
oppositions of the hour, a profound principle of
unity is at work, and that our late enemies may,
when at last some ray of light breaks, rise simul-
taneously with ourselves to substitute international
co-operation for international strife and com-
petition? With fixed prices throughout industry,
economic competition would automatically come
to an end, and with it cross distribution would
tend to disappear ; for no one would be tempted
to buy goods at a distance for some temporary
advantage of gain. The qualitative ideal of
production would tend to replace the quantitative
one, for as the reinvestment of surplus wealth
would no longer be possible it would no longer
go to provide more machinery for more cut-throat

72 GUILDS, TRADE AND AGRICULTURE

competition, but would tend to be spent on the
arts, upon building, education, and the other
amenities of civilization. Pleasure would be
restored to work.

It will have been noticed that I have discussed
the coming of the new social order in the terms
of Guilds and currency rather than in the terms
of property, as customary in Socialist circles.
The reason for this is that I am persuaded that
to begin with property is to tackle the problem
at the wrong end, and the difficulty experienced
in translating the labour programme into action
is due finally to that fact. At every step in the
reconstruction of society it will be necessary to
interfere with property, yet all the same the centre
of gravity of the economic problem is to be found
in currency rather than property ; for currency is
the vital thing, the thing of movement, it is the
active principle in economic development, while
property is the passive. It is true that profits
that are made by the manipulation of currency
sooner or later assume the form of property, but
the root mischief is not to be found in property
but in unregulated currency. To solve the problem
of currency by the institution of the Just Price
under a system of Guilds, is to bring order into
the economic problem at its active centre. Having
solved the problem at its centre, it will be a com-
paratively easy matter to deal with property,
which lies at the circumference. Property owners
would be able to offer no more effective resistance
to change than hitherto landlordism has been
able to offer to the growth of capitalism. By

HOW THE GREAT CHANGE MAY COME 73

such means the reconstruction of society would
proceed upon orderly lines. All it would be
necessary to do would be to exert a steady and
constant pressure over a decade or so, and society
would be transformed completely. But to begin
with property is to get things out of their natural
order, for it is to proceed from the circumference
to the centre, which is contrary to the law of growth.
It is to precipitate economic confusion by dragging
up society by its roots ; and this defeats the
ends of revolution by strengthening the hands of
the profiteer ; for the profiteer thrives on economic
confusion. Of what use is it to seek to effect a
redistribution of wealth before the profiteer has
been got under control ? since so long as men are
at liberty to manipulate exchange, they will
manage somehow to get the wealth of the com-
munity into their hands. Thus, we see that the
solution of the social problem, as indeed of every
other problem in this universe, resolves itself
finally into one of order. Take issues in their
natural order and everything will straighten itself
out beautifully. All the minor details or secondary
parts will fall into their proper places. But
approach these same issues in a wrong order and
confusion results. No subsequent adjustments
can remedy the initial error. This principle is
universally true. It is as true of writing a book
or of designing a building, as of conducting a
revolution. The secret of success in each case
will be found finally to rest upon the perception
of the order in which the various issues should be
taken.

IX
AGRICULTURE AND EMIGRATION

THE corollary of the substitution for international
competition of international co-operation is the
revival of agriculture, for it implies a return to
the idea of communities that are as self-contained
as circumstances will allow ; and such communities
inevitably rest upon agriculture.

In an earlier chapter I showed that the revival
of agriculture was necessary alike to the solution
of our unemployed problem and to provide us
with food now that the days of our industrial
supremacy are numbered. But it is necessary
also for another reason : to ensure a healthy
population. It came as a surprise to most people
in this country that recruiting statistics revealed
the fact that we had a larger percentage of
physical inefficients than any other country at
war. But it is not surprising, remembering that
no other country in the world has such a large
proportion of her population living in crowded
towns nor been industrialized for anything like
the same length of time. These statistics prove
that a town population gradually loses its vitality.
In the past this vitality was every generation

74

AGRICULTURE AND EMIGRATION 75

renewed by a stream of population from the coun-
try. In this light a peasantry on the soil is to
be regarded as a reservoir from which the towns
replenish their stock, and therefore agriculture
stands on a different basis to that of any other
industry, and its welfare should be protected at
all costs. From a mercantile point of view it
matters little whether the population be engaged
in the production of food or motor-cars. But
from a national point of view there is all the
difference in the world, since the production of
food guarantees a nation's future while the pro-
duction of motor-cars does not. Yet when we
remember how big business dominates national
policy we cannot be surprised that, being, as we
saw, heedless of its own future it should be equally
heedless of that of the nation. If, therefore,
one aspect of the return to fundamentals is a return
to the principles of justice, honesty and fair
dealing, the other aspect is a return to the land ;
to a life lived in closer contact with the elemental
forces of nature.

When one thinks of the revival of agriculture,
or the colonization of England as some would
prefer to call it, the first obstacle one feels to be
in its path is the great discrepancy between the
earnings of the town and of the country workers.
The first step towards reform therefore demands
that the wages of agricultural workers be raised.
The recently formed unions of agricultural workers
are doing invaluable work in this direction. But
they are meeting and will continue to meet with
the resistance of the farmers to their demands,

76 GUILDS, TRADE AND AGRICULTURE

and it is doubtful whether the farm labourers
will ever be in a sufficiently strong position to
force the hands of the farmers very much. For
there is only one time in the year when they could
strike with advantage to themselves, and that is
at harvest time. Even then their success would
be doubtful. The resistance of the farmers to
such demands we are apt to ascribe to a grasping
nature. But I doubt whether it can entirely
be attributed to that. The uncertainties of farm-
ing due to natural causes are increased tenfold by
the effects of speculation, and the returns of one
harvest may be swept away by the manipulation
of prices in distant financial centres. So the
farmer's one idea is to build up a reserve against
a possible change of fortune, and this constant
preoccupation tends to develop in time a mean
and grasping disposition.1 But the difficulty could
be got over by a changed attitude towards ques-
tions relating to agriculture. Prices must con-
tinue to be guaranteed by the Government, and
there must be no question of a return to the old
system of competitive prices, as there would be
no question if the implications were understood.
In consideration for such guaranteed prices, the
farmers should agree to raise the wages of their
labourers.

At first sight this suggestion seems to be rather
Utopian ; and no doubt it will so remain as long
as the Coalition remains in power. But would
it be different if a Labour Government held the

1 Since this was written a fall of prices of wheat is
reported.

AGRICULTURE AND EMIGRATION 77

reins ? I am not sure. For while the Coalition
would doubtless refuse to act in this way out of
fear of Labour becoming too powerful, a Labour
Government might find difficulties owing to
jealousies in the ranks of Labour. The Labour
Party is responsible to its own supporters, and as
it consists mainly of town workers it is possible
that it would object to such action on the grounds
that it was creating a privileged class of workers.
This is not entirely a matter of imagination.
The Building Guilds have found themselves up
against this kind of thing. Propagandists on
their behalf have found opposition to them from
other classes of workers who fear that the workers
in the building trade may become a privileged
class. This is one of the weaknesses of the Socialist
appeal. For whereas the doctrine of Socialism
is espoused by many (I hope the majority) from
altruistic motives, it has nevertheless secured the
support of large bodies of workers by its appeal
to their immediate -self-interest ; and self-interest
is apt to be short-sighted. In this case it has led
the workers to demand an impossibility — that any
advantages that accrue to Labour shall accrue to
all at one and the same time.

Perhaps the most practical way of meeting this
difficulty is to get into the minds of the workers
some idea of the structure of society, and the need
of drastic reconstruction. Very few of them to-day
have any idea that society needs to be recon-
structed. They are of course familiar with the
word, but not, I fear, with the idea. The evils
of society, they have been told, are incident to

78 GUILDS, TRADE AND AGRICULTURE

capitalism, and they imagine that once a Labour
Government is returned to power capitalism will
be abolished and we shall live happily ever after-
wards. Beyond that they do not go. They have
no idea that society is crumbling to pieces, and
needs to be rebuilt in the same way that a house
that is falling down will need to be rebuilt, and
that in rebuilding society it is no more possible
for the benefits that are to be conferred upon
Labour to be conferred simultaneously upon all,
than it is possible in building a house for all the
bricks to be laid at one and the same time. Nor
can they have any idea until differentiation is
made between primary and secondary production,
and they come to realize that in any rebuilding of
society it is necessary to deal with primary activi-
ties before it is possible to deal with secondary
ones.

The idea needs to be popularized that agri-
culture is fundamental ; that it forms the base of
the pyramid of production ; and that as it has
been allowed to decline in this country the recon-
struction of agriculture must take precedence over
all other industries. The revival of agriculture is
immediately important, because it would absorb
so many of our unemployed ; a thing that is so
obvious that one wonders how it is that in the
present crisis the two are never connected by
our leaders. But the case is even stronger still
in the long run, since, if we neglect to revive
agriculture, it is a certainty that in a few years'
time we shall be left without food ; for, as I have
already pointed out, the countries that supplied

AGRICULTURE AND EMIGRATION 79

us with food are taking to manufactures, so they
will not require our goods. Therefore, as we shall
have nothing to give them in exchange for food,
we must take to growing our own.

But there are deeper reasons than these of mere
expediency why agriculture should be revived. If
the economic problem is to be handled success-
fully we must be as self-supporting as possible.
It is simply impossible to initiate drastic reform
so long as our industries are dependent upon
foreign markets, for in this case the factors
governing the problem are outside of our control.
The modification of a tariff or a war, the discovery
of some new raw material or some other such event
in some remote corner of the globe, dislocates the
labour of those at home, while all the time our
fortunes remain in the hands of capitalist adven-
turers. Under a system of international markets
the workers become parasitic upon the capitalist,
because he alone can find outlets for goods.
Indeed, so long as industry is dependent upon
foreign markets, production will be very much
of a gamble. It will depend upon speculation,
and this is incompatible with the reconstruction
of society. But if agriculture were revived, a
large home market would become available. If
the agricultural worker were paid as he should
be paid, it would react to the benefit of the town
workers by relieving the pressure of competition
in the towns. We should soon find that a pros-
perous peasantry was our greatest economic
asset. The raising of the wages of the agricultural
workers would, moreover by putting the labourers

80 GUILDS, TRADE AND AGRICULTURE

on their feet again, pave the way for the organiza-
tion of Agricultural Guilds. Such Guilds would
regulate prices, be centres of mutual aid, buy and
sell and do the other work undertaken by agri-
cultural organization societies. They should,
moreover, administer the land ; and in this con-
nection I would suggest that the land should be
owned as well as administered by the local Guilds.
This suggestion is offered as an alternative to
nationalization, in order to avoid the evils of
bureaucracy.

The Agricultural Guilds would be mixed or
undifferentiated organizations. They might be
likened to the Guilds Merchants of the Middle
Ages to the extent that the village carpenters,
smiths and other isolated workers would be in-
cluded in them, and also that the functions of
the parish councils would be merged in them in
the same way that the Guilds merchant and muni-
cipalities were identical ; or they might be likened
to the village communes of pre-feudal days, differ-
ing from them to the extent that whereas the village
communes exchanged by barter, these Agriculture
Guilds would regulate currency by means of fixed
prices. It may also be assumed that the strip
system would not be reverted to. As to whether
land is best cultivated on large or small holdings
I am not prepared to dogmatize, as opinion of
those with practical experience is so divided.
But, after all, it is a secondary matter, and one
that may well be left for the Guilds themselves to
decide. It would be an important issue if our
ideal were one of peasant proprietors, but not if

AGRICULTURE AND EMIGRATION 81

the country is to be colonized by groups of workers
organized into Guilds.

Colonization by groups is also the key to the
problem of emigration. What is so distasteful
to most people in connection with emigration
to-day is the isolated feeling of the man who emi-
grates alone ; for not only is he separated from
his friends, but he is left entirely to his own initia-
tive ; and town-bred people naturally hesitate
from venturing upon a career so full of hazards.
Such men when they do emigrate rarely settle
down in the land of their adoption. They cherish
the hope of making a pile and returning home.
It is this spirit that has corrupted colonial life,
and has brought into existence in our colonies in
less than a century social problems as bad if not
worse than ours which have taken centuries to
develop. This was not the case with the early
emigrants who settled in America and elsewhere.
They founded societies which were comparatively
stable ; and not the least of the things that
enabled them to found such societies was that
some of the old Mediaeval communal spirit sur-
vived among them ; and so they emigrated in
groups, a custom that has survived among Italians
and Eastern Europeans to this day. And this
fact makes all the difference. For when men and
women emigrate in groups they are held together
by personal and human ties, and can render each
other mutual aid and support. In consequence
they settle down in a way that emigrants who
go individually never do. We were successful in
the past as a colonizing power because this com-

6

82 GUILDS, TRADE AND AGRICULTURE

munal spirit obtained ; colonization has become
impossible with us now because of the individualism
that is rampant. For this individualism has
built up trusts and syndicates and other mono-
polies that suck the life-blood out of the emigrant

X

MACHINERY AND UNEMPLOYMENT

THE revival of agriculture raises the question of
the employment of machinery, and this in turn
raises so many other questions that it is necessary
to pause and consider them.

At the moment, I am not concerned to discuss
whether, considered in the abstract, machinery is
or is not a desirable thing, since making no claims
to be anything more than a means to an end, it
can be demonstrated to be either good or bad,
according to the philosophy we hold. It is hope-
less, therefore, to attempt to secure acceptance
of any conclusion regarding its ultimate use until
some unanimity of opinion is first established in
the realms of philosophy and belief. But mean-
while we are confronted with a very practical
question about which we must make up our minds :
What is to be our primary aim in reviving agri-
culture ? Is it to provide us with food, or to
find work for the unemployed, or what ? The
question is a pertinent one, because the defence
of unregulated machinery has hitherto rested on
the belief that in the long run it would emancipate
mankind from the curse of Adam by reducing

83

84 GUILDS, TRADE AND AGRICULTURE

labour to a minimum and thus set us free to pursue
the higher ends of life. As to whether most of
those who may claim to have been so liberated
show any disposition to follow higher pursuits, I
do not for the moment inquire, though the
" Gentleman with a Duster " has a different tale
to tell. But it may be observed that nowadays
when this prophecy that machinery is destined
to liberate mankind from the necessity of toil
shows some signs of being fulfilled, when for the
moment we have produced enough and to spare,
we are panic-stricken at the army of unemployed
in our streets and worry ourselves to death to find
them some work to do. The situation reminds
us of an ancient Hindu story of a man who went
to a great yogi for a formula to raise the devil.
The yogi was quite willing to oblige him, but
warned him before doing so that once the devil
was raised up he must be kept in employment or
he would turn and devour him. The man, how-
ever, was not to be intimidated, so he took the
formula and raised the devil by his incantations ;
he had plenty of work, and managed for a long
time to keep the devil fully occupied. But a
time came when work began to run out, and he
lived in terror of his destruction at the hands of
the unemployed monster. In desperation he went
back to the yogi to seek advice. " Well," said
the yogi, " I told you what to expect. But do
not despair. Take this dog to your devil and ask
him to straighten its tail. That will keep him
busy for ever." Even so is it with our industrial
system, not leisure but terror is at the end of its

MACHINERY AND UNEMPLOYMENT 85

story. We must find it work to do, and the
only work we can find is about as utilitarian as
straightening the dog's tail.

Now the reason why we act in such illogical,
contradictory ways towards machinery is because
in proportion as it tends to become automatic
it raises questions which nobody can answer. If
machinery is to reduce labour to a minimum, then
it follows that some other method of payment
must be instituted from the one customary
to-day. For payment to-day is for work done,
and that is no use if work is to be abolished.
The necessity of making some such fundamental
change is at the back of the minds of some of
those who devise credit schemes and advocate
consumer's credits which are to be distributed
independent of work done. None of these schemes
will bear looking into. But they do face up to a
difficulty that the modern world prefers to ignore :
how people are to be paid in the machine society.
Perhaps an effort to find a solution of this problem
is the clue to Marx, and is what he was really after
when he advocated the abolition of the wage
system. Anyway, he makes his whole theory of
social evolution dependent upon the development
of machinery. He saw clearly that the machine
era would end in the dilemma that faces us to-day,
inasmuch as the end of machine production was
to be the creation of an unemployed problem
that could not be solved by the time-honoured
methods. The solution he proposed was of the
nature of a leap in the dark. The unemployed
were to rise, take possession of the means of pro-

86 GUILDS, TRADE AND AGRICULTURE

duction and exchange, and at the end of it was his
structureless Communist state. That was as far
as he saw. His thinking came to an end at the
point where the real difficulties begin, and view-
ing the problem to-day at closer quarters it is not
quite as simple as it appeared to Marx. We can
see the unemployed problem but not the Com-
munist state arising out of it, though we do see
the possibility of revolution.

For my own part, I do not believe that there
is a solution of this problem on modernist lines.
It seems to me that the tradition of payment for
work done is so deep-rooted that men will con-
tinue to think and act in such terms in spite of
the fact that this tradition is challenged by the
use of machinery. The difficulty is to think in
any other terms, and I feel it to be a part of wisdom
to accept the present method of distributing
purchasing power by means of payment for work
done as irrevocable, whatever the implications
may be. For of the choices before us, either the
abolition of such a means of distributing pur-
chasing power or limiting the use of machinery,
the latter seems to me simplicity itself compared
with the former, for I can think in the terms of
the latter but not of the former, and neither,
apparently, can any one else. Those who try
go mad.

Assuming, then, that the present method of
distributing purchasing power is to persist, it
follows that our aim should be to regulate
machinery in such a way as not to dislocate our
method of payment for work done, and in this

MACHINERY AND UNEMPLOYMENT 87

connection it is to be observed that the oppor-
tunity for reducing such a principle to practice
presents itself in connection with the revival of
agriculture. For agriculture is fundamental, and
we could build on its base a new society that would
gradually replace our present one. In this sense
we get a new start, and it is up to us to make up
our minds now. The question arises in connection
with the use of agricultural machinery. To what
extent is it to be used ? During the war it was
everywhere encouraged because it was a matter
of urgency to produce food. But if agriculture
is to be revived now it will have the further object
of providing work for the unemployed. Let us
therefore face the fact that the more machinery
we employ the less work there will be for the
unemployed. Hence, if our primary aim be to
provide work for the unemployed, the less
machinery we use the better. On the contrary,
if we decide that it is foolishness not to use
machinery, let us be clear what we are going to
do with the unemployed. To my way of thinking,
there is only one sane thing to do if machinery
is to be used, and that is to employ the same number
of men as would be required if no machinery were
used, and to reduce the number of hours worked
as more machinery is used. For I insist that in
all such questions consideration of the human
factor should come first. I believe the ultimate
cause of our confusion is to be found in the fact
that it is our custom to put it last, and to assume
that the right thing to do is to put other con-
siderations— financial or mechanical — first, leaving

88 GUILDS, TRADE AND AGRICULTURE

the human factor to take care of itself as best it
can. Let us hope that the magnitude of the
present unemployed problem which refuses to
solve itself will be the precursor of better things
by forcing upon us the necessity of giving human
considerations the first place.

One of the advantages of the solution I suggest
is that while machinery would be used, we should
not be at its mercy, for the economic system
would be independent of it. Supposing, for
instance, a day came when owing to the shortage
of petrol the use of tractors had to be abandoned,
the economic system would not break down, for
it would be constructed with a margin of safety.
All it would mean would be that those employed
upon the land would have to work longer hours.
If machinery were employed in this way it would
do the things it professes to do. It would reduce
drudgery, and it would give more leisure, and it
is possible that craft developments might follow,
for there is no reason why home crafts should
not be joined up to the pursuit of agriculture in
the future as in the past, when the long winter
evenings were employed in this way. Any addi-
tional leisure that the use of machinery would
give might be so employed, though as a man's
living would be secured by his agricultural earn-
ings, it would be optional. The objection to the
use of machinery would fall to the ground if its
actual use corresponded to its theoretical justifica-
tion. But what hitherto has made all discussion
on the subject so hopeless, is that while in practice
machinery is used for one purpose, it is theoretic-

MACHINERY AND UNEMPLOYMENT 89

ally justified for another, while belief in its bene-
volence was so confident and absolute that it
seemed to matter little to people what motive
prompted its use so long as it was used. We
must break with this sloppy-minded attitude
towards machinery, and learn to reason about it
as we reason about other things, for it is a certainty
we shall never be able to control it until we think
intelligently about it.

But there are other and more fundamental
questions connected with the use of machinery
that must not be lost sight of. One of these is
the exhaustion of natural resources which follows
its unregulated use. Mention has been made of the
petrol shortage. It is estimated that the supply
in America will only last another twenty-five
years. We are engaged in a war in Mesopotamia
to secure another source of supply. America has
designs upon Mexico for the same object. Borings
are being made to discover a source of supply
in this country ; no doubt there are others. But
some day or other there will be no more, and it
is sheer folly, to say the least, to commit our-
selves to methods of production and transport
that depend upon supplies that are limited. For
under such circumstances our position will become
desperate as natural resources tend to become
exhausted. To reduce the position to its lowest
denomination in the terms of cash, the cost of the
wars in which we shall be involved in order to
get possession of new sources of supply ought to
be counted against any savings that are made
in other directions, and what is true of petrol

90 GUILDS, TRADE AND AGRICULTURE

is true of other materials. Industrial production
uses up all materials at such an alarming rate
that some day we shall be left hard and dry if
the matter is not taken in hand. It would be
well for us to be forewarned in time, and now
that the opportunity of a fresh start presents
itself, some reason should be brought to bear on
the question. If we lay it down as a maxim
that the first principle of a normal civilization
is that it should be as self-contained as possible,
the second is that it should in no sense be living
upon capital, but should arrange its production
in such a way that it should largely reproduce
itself. This is not entirely possible, for we must
make use of mineral wealth to some extent. But
wisdom suggests that our resources should be
conserved and not wasted in the reckless, spend-
thrift way we are accustomed to do. Our news-
papers are full of indignation against the waste
by Government Departments, but scarcely a word
is ever said of the thousand times more serious
waste of natural resources, though one would
have thought that the paper shortage should have
made them think.

The modern problem is so elusive that it is gener-
ally difficult to prove a certain tendency to be
evil or dangerous. We may, however, test the
truth of many tendencies by their bearing upon
agriculture, and here it is to be observed that the
tendency of all modern developments is to rob
agriculture of its manures. Human and animal
manures are natural fertilizers. In this respect
hitherto there existed a reciprocal relationship

MACHINERY AND UNEMPLOYMENT 91

between man and nature. Food consumed was
returned to the earth as manures. But when the
water-carriage system of sewage came along with
its superior convenience, which is undeniable,
this chain of reciprocity was broken, and resource
was had to chemical manures, and the guano
deposits of South America. Attention was called
to this problem twenty-five years ago by Dr.
Vivien Poore, who wrote a book on the subject,
Rural Hygiene, the object of which was to prevent
the spread of the water-carriage system of sewage
into rural areas. He showed how the water-
carriage of sewage produced the typhoid fever
germ ; that our sanitary measures were designed
to protect ourselves against this germ ; how
introduced into rural areas it poisoned water
supplies and necessitated enormous expenditure on
schemes to get water from distant and unpolluted
sources ; that the manurial value of the human
excrement was destroyed by water-carriage, and
that chemical manures were no substitute for the
natural organic manures. But the warning was
ignored, the water-carriage system was convenient,
and the manufacture of sanitary goods was a vested
interest, and so nothing was done. One more
problem was added for posterity to solve. Since
the development of motor transport the problem
is aggravated, for it robs agriculture of horse
manures. When mention is made of these things,
the reply we get is, that in the future it will be
possible to extract the nitrogen from the air.
Whether or not this is a really practical proposi-
tion, or whether the nitrogen will remain eternally

92 GUILDS, TRADE AND AGRICULTURE

in the air I do not know, but it illustrates the
thoughtless way in which we are content to go
on. We study only our immediate convenience,
create enormous problems, and trust to sheer
chance to getting out of them. The many and
wonderful discoveries of science have apparently
reacted to create this spirit. It prevents us from
exercising any forethought in respect to things
of a fundamental nature by confirming us in the
belief that something is bound to turn up. Our
national life is lived after the manner of a
spendthrift who is prepared to squander one
fortune on the chance of another being left
to him.

Again, this thoughtlessness is encouraged by
the complexity and pace of modern life — a conse-
quence of the misapplication of machinery — which
militates against reflection and clear thinking of
all kinds. Nowadays there is no time for any-
thing, the complexity of our society bewilders
people. No one can deny these things, yet if it
is true that the development of speed and com-
plexity beyond a certain point is evil, then we
have a clear case for the regulation of machinery.
But here we run up against the prejudices of the
thoughtful just as much as the thoughtless. Let
us examine them.

Take first the economists. They will deny in
toto the existence of a machine problem, affirming
that the evils that have accompanied the use of
machinery are due entirely to the peculiar economic
conditions which existed at the time of its intro-
duction, or in other words, that machinery has

MACHINERY AND UNEMPLOYMENT 93

been misapplied because it arrived at a time when
the accepted social gospel was that of economic
individualism, from which it follows that what
we have to do is to substitute some form of economic
co-operation for economic individualism when the
machine problem would automatically solve itself.
But is such reasoning valid ? If it be true, as I
am willing to admit, that the economic problem
preceded the machine problem, and is therefore
more fundamental, it is equally true that morals
are more fundamental than economics. If, there-
fore, our practical activity is to be related only to
those things that are fundamental, then it must
be based upon morals and not upon economics.
Economists can't have it both ways. Either we
base our activities upon ultimate truth, in which
case we abandon economics and pursue morals, or
we base them upon a series of proximate truths,
in which case the problem of machinery takes its
place alongside that of economics. We may agree
that the substitution of economic co-operation for
economic individualism must precede the control
of machinery, but such co-operation would not
ensure its control in the face of the popular
prejudice in favour of its unrestricted use.

But economists are not the only people with
prejudices on this question. There are the
moralists who affirm that there is no such thing
as a machine problem, inasmuch as machinery
is non-moral, and its application will, therefore,
be good or bad according to the motive that in-
spires its use. The weakness of this argument
is that it assumes that the intelligence of the

94 GUILDS, TRADE AND AGRICULTURE

user corresponds always with his moral intention.
We know that in other departments of activity
this does not by any means follow, and that a
man's motive may be good and his actions bad,
or vice versa. The case, therefore, for regulating
machinery rests finally on precisely the same
grounds as any other kind of regulation. Firstly,
to restrain those whose motives are bad from in-
juring society by their actions, and secondly,
to prevent those who with the best of motives do
through ignorance things which in their ultimate
effects are harmful.

But how may machinery be regulated ? What
kind of regulation is needed ? The answer is
that our attack must not be directed primarily
at machinery, but at the system of the division
of labour that lies behind it. For that system
was the great factor in the destruction of the
creative impulse in industry, and we may be sure
it will not reappear until it is destroyed. More-
over, the abolition of the division of labour cuts
at the very base of the quantitative ideal of pro-
duction, which is immediately responsible for the
misapplication of machinery. If we keep in mind
the central idea — the general principle that
machinery needs to be subordinated to man — I
think we shall find that, generally speaking, the
issue is one between large and small machines.
W7e should forbid large machines in production
on the principle that large machinery tends to
enslave man because he must sacrifice himself
mentally and morally to keep it in commission,
whereas the use of small machines has not this

MACHINERY AND UNEMPLOYMENT 95

effect, because they can be turned on and off at
\\ill, as, for instance, is the case with a sewing
machine. Exceptions would have to be made to
this rule, as in the case of pumping and lifting
machinery where no question of keeping it in
commission necessarily enters. The difficulty of
deciding whether a machine was or was not harm-
ful would not be difficult to determine once the
general principle were admitted that machinery
needs to be subordinated to man.

XI

ON MORALS AND ECONOMICS

I CONCLUDED the last chapter by answering
objections of doctrinaire economists and moralists
to the regulation of machinery. As it is not
improbable that they will object to my general
position, it is necessary for me to anticipate their
attacks. The economists will object to the
conception of the Just Price because it involves
moral considerations, and they demand an economic
solution of the problem of society that is inde-
pendent of morals ; the moralists, on the contrary,
will maintain that my policy is impracticable
inasmuch as it presupposes a moral revolution
to make it effective.

Respecting the economic objection, I deny
in toto that there is any such thing as a purely
economic solution of our problems, because I
do not believe that there is such a thing as a fool-
proof society. The search for it is as hopeless
as the search for perpetual motion, and it has
been at the bottom of all the confusion in Socialist
economics and policy in the past. It is responsible,
too, for the gulf that separates formal Socialist
theory from its informal philosophy. Of course

ON MORALS AND ECONOMICS 97

it is to be admitted that there are certain things
in economics in which morals play no part. Such
factors in the economic situation as the inequalities
of nature, the fluctuations due to a good or bad
harvest, have nothing to do with morals. But
such things do not impugn the fact that economics
in the larger sense presupposes certain moiai
assumptions any more than because a man's
life is determined partly by accidental circum-
stances it is to be explained apart from morals.
This heresy goes back to Ricardo. Before he
wrote economists always based their reasoning
upon certain moral assumptions. They were
either like the Mediaeval economists concerned
to understand how economic managements could
be brought into relation with the highest morality,
or like Adam Smith they postulated human
selfishness as the motive force of economic activity.
But what they never thought of doing was to
affirm the existence of economics apart from
morals. In the hands of Marx this heresy received
a new development. He turned the tables com-
pletely, inasmuch as he made morals dependent
upon economics, and this way of reasoning has
persisted among the more doctrinaire elements
in the Socialist movement ever since, in spite of
the fact that Ruskin nearly fifty years ago exposed
the fallacy in the first few pages of Unto this Last.
The reason for the survival of this fallacy is
perhaps to be found in the fact that at the present
time it seems impossible to interfere with the
course of economic development by action of a
purely moral order. But this is to be misled

7

98 GUILDS, TRADE AND AGRICULTURE

by appearance, for moral action only influences
economic development over a long period of
time, the moral action of one generation deter-
mining the economic environment of the next.
It is this that leads so many people to suppose
that economics and morals exist apart.

I have more sympathy with the objection
that will be raised by the moralists, because they
happen to be right in theory, but mistaken as
to the actual facts. It is not true to say that
the maintenance of the Just Price presupposes
a higher moral development than that which
exists to-day. For this again is to be misled
by appearances. The popular outcry during the
war against profiteering demonstrates that moral
standards still exist among the people, while the
success of the Socialist movement as I explained
in the first chapter is due to the fact that it has
some qualities of a moral revolt. It is true that
Socialists have been primarily concerned with
the popularization of certain economic doctrines,
but in order to obtain a hearing for them they
have been obliged to attack the ideal of wealth.
It has thus come about as a consequence of these
attacks, repeated from one end of the country
to the other during this last thirty years, that a
changed moral attitude towards wealth has come
into existence, and has influenced large bodies
of people entirely unaffected by Socialist theories.
I think it is no exaggeration to say that in this
direction the Socialist movement has accomplished
a moral revolution comparable only to that
effected by the Early Christians, who attacked

ON MORALS AND ECONOMICS 99

wealth as vigorously as any Socialist, though
perhaps with a different object. Recognizing
this, I feel it ill becomes moralists who have
rarely attacked wealth at all to talk about the
need of a moral revolution before the Just Price
and other measures could be established. They
should be told that the moral revolution in this
direction is an accomplished fact.

The awakening of the public conscience in
regard to collective morality should not be over-
looked because simultaneously with it personal
morality has suffered a decline. To some extent
that decline is doubtless due to certain Socialist
teachers, though not to the influence of the move-
ment as a whole. To a far greater extent it is
to be attributed to the economic pressure under
which most people live in these days. Sexual
morality is not improved by the fact that such
a large proportion of the rising generation find
it difficult to marry, nor does overcrowding and
the housing shortage improve matters. While
again the commercial morality imposed by large
concerns upon those they employ gets steadily
lower and lower. But what men do under duress
scarcely affects their character at all. Father
Dolling, after years of intimate experience of the
Portsmouth underworld, an environment of almost
inevitable vice and crime, came to the conclusion
that its inhabitants were comparatively spiritually
innocent. " Our falls in Portsmouth," he says,
" entailed no complete destruction of character,
hardly any disfigurement at all. Boys stole,
because stealing seemed to them the only method

100 GUILDS, TRADE AND AGRICULTURE

of living — girls sinned — unconscious of any shame
in it, regarding it as a necessary circumstance
of life if they were to live at all. The soul un-
quickened, the body alone is depraved, and,
therefore, the highest part is still capable of the
most beautiful development/' x It is the same
in the commercial world. Men pursue immoral
methods in business, because it seems to them
the only way of living, and remain unconscious
of any sin in the matter. When they do become
conscious they revolt. The Socialist movement
draws its recruits from among those who are
in moral revolt, and that is why I am persuaded
it is only finally to be understood as a moral
revival. Socialists talk about changing the
system, not because they are indifferent to
morality, but because they realize the impossi-
bility of acting on moral precepts amid such
adverse circumstances. Such being the motive
force behind the demand for a change of the
system, there is no reason to doubt that the
moral effort necessary to the enforcement of
the Just Price will be forthcoming. Nay, it
can be said that nothing less than a desire to
enforce such principles of honesty and fair dealing
could suffice to bring the Guilds into existence.

What may be doubted, it seems to me, is not
whether the moral effort necessary to the main-
tenance of the Just Price under a system of
Guilds would, in the event of their establishment,
be forthcoming, but whether our attachment
to city life may not stand in the way of a revival

1 Ten Years in a Portsmouth Slum, by Father Dolling.

ON MORALS AND ECONOMICS 101

of agriculture until it is too late. The town
worker has become accustomed to a life of bustle,
crowded streets, trams, railways, cinemas, etc.,
that makes him restless under simpler conditions.
He has, moreover, become dependent upon a
complicated machine. That machine allots to
him a single specialized task and supplies his
other needs. In consequence he has lost the
habit of doing things for himself, and depends
more and more upon buying what he needs, and
this has undermined those qualities of resource-
fulness, forethought and patience that are the
necessary accompaniment of an agricultural life.
To break with this tradition before the system
comes to grief is the real obstacle in our path,
for everything combines against us. We have
not only to contend with the inertia common to
all reform, but with the rooted habits of city
populations. And it may be that just as it was
impossible to make people realize the possibility
of a European War before it was upon us, so it
will be impossible to induce people to realize
our industrial position until starvation threatens
us if more food is not produced. If this is
the case we shall drift and drift until the only
way of meeting the situation will be some form
of agricultural conscription, and our country-
side will be dotted with tents and huts to house
workers engaged in a desperate effort to cope
with the problem of food. That is what things
must come to if we do not wake up before long.
Meanwhile it is the plain duty of publicists of
all kinds to bring home to the people the realities

102 GUILDS, TRADE AND AGRICULTURE

of the situation — to make them face the facts,
and in the short space of time allotted to us to
assist in the cultivation by every means at our
disposal of such habits of industry and self-
reliance as will enable the people to change their
ways of life with the minimum of dislocation.

XII
INDUSTRIALISM AND CREDIT

IT has been my aim in this little volume to con-
centrate attention on certain issues that I feel to
be primary and fundamental. There are other
things that must be done, such as the liquidation
of the war loan, but on this issue I have nothing
to add to what has already been said by others.
The expenditure of surplus wealth by the rich
in the ways it used to be spent would also do
much to mitigate the evils of unemployment.
But no one at the present time can act in these
matters except the rich, and as it seems impossible
to persuade them to do anything that ultimately
matters, it is just as well to base our politics
upon the assumption that they will continue
as at present — hoping against hope and doing
nothing.

The reason why we should concentrate our
attention upon the things that are fundamental
is precisely because they have been for so long
neglected, while their importance to us is pro-
portionate to their neglect. They were neglected
because, as I have said before, they are antipathetic
to industrialism, and industrialism appeared before

103

104 GUILDS, TRADE AND AGRICULTURE

the war to be built upon a rock, and few believed
it carried within itself the seeds of its own des-
truction. On the contrary, the world was cursed
with an easy-going belief that though evils un-
doubtedly existed they were merely incidental
to the system, and could be remedied by half-
baked measures of reform. But that serene
self-confidence nowadays is gone, and I can write
in a different way. It is no longer necessary
for me to plead for recognition of the fact that
internal evidence pointed to the break-up of
our industrial civilization, since nowadays we
can see it dissolving before our very eyes — the
only evidence which the modern world is prepared
to believe. In these circumstances self-preserva-
tion suggests that delay is dangerous, and that
it is necessary to get to work at once to build
the new society before the existing one breaks
down completely.

Meanwhile, those who still retain any belief
in the possibility of saving existing society from
disruption are concentrating on the problems
of credit. With the effort of those who are
attempting to overcome the barriers to a revival
of foreign trade set up by the depreciation of
the exchanges, and with those who would break
the monopoly of the banks, I have every sym-
pathy. But with those who imagine that the
problems of credit can be cured by some Morri-
son's Pill it is different. In my opinion they are
living in a world of illusions. One of these pill
schemes, that formulated by Major C. H. Douglas,
and for which the New Age has stood sponsor,

INDUSTRIALISM AND CREDIT 105

demands special consideration, since, as the editor
of that journal acted as sponsor for National
Guilds, it has come to be discussed as if it were
an approach to the Guilds.

It will not be necessary for us to consider
this scheme in all its details. It will be suffi-
cient for us to discuss its central idea. And
here I would observe that though I cannot
accept Major Douglas's scheme, I recognize
that he has attacked a real problem, though
I may add that to some of us it is not a
new one. Briefly, then, Major Douglas faces
the fact that the policy of Maximum Production
inevitably results in a deadlock, upsetting the
balance between demand and supply, but instead
of tracing it to the causes I have enumerated
in Chapters III, IV and V — that is ultimately
to certain moral causes — he ignores morals
entirely, and traces the phenomenon entirely
to its immediate cause in our system of credit.
This leads him to seek a solution of the problem
in the terms of accountancy. He proposes to
correct the discrepancy between demand and
supply by selling goods below cost. There is,
of course, nothing new in selling below cost.
Manufacturers have resorted to it in every financial
crisis when they have overproduced, to get rid
of their surplus stocks. What is new is this :
Appreciating the fact that the present financial
crisis is no ordinary one that will pass by the
normal operations of supply and demand, he
exalts a practice that has hitherto been resorted
to as a measure of temporary expediency into

106 GUILDS, TRADE AND AGRICULTURE

a permanent principle of finance. For according
to Major Douglas, the selling price of articles
must always be below cost, while he proposes
that the difference between the actual costs of
production and the selling price shall be made
up to the producers by the Government in
treasury notes. That is the gist of the scheme.
It is the only idea we need discuss, as the others
are merely accessory to it.

Now, the first and most obvious objection to
this scheme is that such a wholesale issue of
paper money would depreciate the currency.
Major Douglas proposes to guard against this
by the fixation of prices. To which I answer
that if this measure were to be effective, prices
would have to be fixed simultaneously for all
commodities in all industries, since if the scheme
were applied gradually and prices fixed below
cost in one industry and not in the others the
prices of commodities that were unfixed would
rise to restore the balance. But to fix prices
simultaneously in all industries is impossible,
for in these days of international markets the
unit to be considered is not this country, but
the world. Under such circumstances the proposi-
tion is unthinkable. It is the reductio ad absurdum
of our economic system. I have advocated fixed
prices (but not selling below cost), but I recog-
nize clearly that a system of fixed prices could
only be introduced gradually, and it seems to me
that any scheme to be practical must be based
upon that assumption.

The truth is Major Douglas has confused cause

INDUSTRIALISM AND CREDIT 107

and effect. He sees that the operations of in-
dustry to-day are governed by the credit facilities
in the control of the banks, and so he concludes
that the whole problem is that of credit — or if
that is not entirely true, it is true to say that
he thinks the problem of credit is capable of
a separate and detached solution. It will clear
the air to say that the problem of credit is not
the central but the last phase of the disease
It is the dilemma in which a civilization based
upon usury finds itself at the finish. It makes
its appearance because the limit of usury has
been reached. And it is because of this that
the problem is not to be resolved finally in the
terms of accountancy, but of morals. For cen-
turies the desire for profits has been the driving
force in industry. It has been behind our indus-
trial developments and brought into existence
our vast complicated civilization. Nowadays the
limits of this development have been reached
because the limits of compound interest have
been reached, and the centralizing process is
complete. Recognizing the fundamental nature
of this problem, it is vain to suppose that a
solution can be found for this misdirection of
activities merely by a re-shuffling of the cards,
which is what Major Douglas's scheme amounts
to. On the contrary, the only thing that can
lift us out of the economic morass into which
we have fallen is finally the discovery of a new
principle, the emergence of a new motive, a new
driving force. The experience of history teaches
us that there is finally only one power in this

108 GUILDS, TRADE AND AGRICULTURE

universe capable of supplying this need and
successfully challenging this commercial spirit,
and that is religion. To be more precise —
Christianity, and Christianity as it was under-
stood by the Early Christians who attacked the
ideal of wealth and property as vigorously as
any Socialist. It was Christianity that re-created
civilization after it had been disintegrated by
the capitalism of Greece and Rome, and if our
civilization is to survive, it will be due to the
re-emergence of this same spirit.

But it will be said that if we are to wait until
a revival of Christianity is accomplished we are
lost, for it is impossible to expect wholesale
conversions while the problem confronting us
develops with such rapidity. To which I answer
that I am speaking of the ultimate solution ;
not of immediate measures. But it would clarify
our thinking enormously about immediate prac-
tical measures if we considered them in the light
of the teachings of Christianity instead of the
materialist philosophy. No one who thought
clearly in the terms of Christianity could ever
fall into the credit or Bolshevik heresies because
he would not think in the terms of Industrialism.
And he would not think in the terms of Industrial-
ism because he would realize its central principle
was a denial of everything that Christianity
stands for : " Take no thought saying, What
shall we eat ? or, What shall we drink ? or, Where-
withal shall we be clothed ? (for after all these
things do the Gentiles seek :) for your heavenly
Father knoweth that ye have need of all these

INDUSTRIALISM AND CKEDIT 109

things. But seek ye first the kingdom of God,
and his righteousness ; and all these things shall
be added unto you." This is the method of
Christianity. But Industrialism is the organiza-
tion of society on the opposite assumption. Seek
ye first material prosperity, and all other things
shall be added unto you it says. But experience
proves not only that they are not added, but
in the long run the material things themselves
which have been so anxiously sought are taken
away.

Meanwhile, let us accept the fact that the day
of our industrial supremacy is over, and that
we cannot hope any longer to export such vast
quantities of goods to distant markets as hitherto.
As our industries will not be able to give employ-
ment to such vast numbers of workers, agriculture
must be revived to provide at the same time
work for the unemployed, and the food we shall
in the future be unable to obtain unless we produce
it for ourselves. This will necessitate a drastic
land policy. It is a matter of life and death to
us, and no vested interests must be allowed to
stand in the way, any more than they were allowed
to stand in the way of the conduct of the war.
Men must be trained in agriculture and planted
on the land with their families. And they must
be organized in groups under Agricultural Guilds.

As it is improbable, even with agriculture revived
and England colonized, for work to be provided
for more than a part of our unemployed, we must
be prepared for emigration on a vast scale. Here
again organization must be in groups. We

110 GUILDS, TRADE AND AGRICULTURE

must in fact plant new societies as the Greeks
did when they colonized. There must be agri-
culturalists, craftsmen, doctors and others
necessary to fulfil the various needs of these
communities.

In order that our colonies may absorb our
surplus population the individualistic commercial
philosophy which has dominated life must be
abandoned and a return made to those old
principles of organization and fair dealing which
are crystallized for us in the idea of the Guilds
and the Just Price. The popularization of these
ideas should accompany all efforts of reform, for
they are the two poles, as it were, of sanity in
social arrangements.

Then the handicrafts must be revived and
machinery controlled, otherwise the problems
which perplex us will speedily reappear in these
new centres. It is possible that in the future
machinery may turn out to be a blessing instead
of the curse which it is to-day. But if its course
is to be turned from destruction to construction
we shall need to think about it intelligently, and
the first sign of grace in this direction will be a
determination to control it. Once the principle
were admitted its practical application would
not be difficult. It could be gradually brought
under control by taxing its use where it was
socially undesirable. In other directions its use
might be prohibited entirely. Where questions
of foreign trade were involved agreement would
have to be reached with other countries.

The measures I have enumerated are the things

INDUSTRIALISM AND CREDIT 111

most fundamental. They would become the
first practical steps towards the creation of the
new world order. Though the unemployed pro-
blem is at the moment a great perplexity to us,
its appearance is a necessary circumstance in
the transition to a better order. Henceforth
politics will orientate themselves around the
problem of the unemployed, and the association
of the unemployed problem with social recon-
struction should convert idealism into the terms
of practical politics. For just consider what a
fundamental change of attitude this unemployed
problem may bring about. Hitherto it has been
the custom in all questions of policy to put the
material factor first and to let the human factor
shift for itself as best it could — to put the interests
of capital before the interests of life. Henceforth
this order will be reversed. The urgency of the
unemployed problem will compel us to give
human considerations the first place, and it must
continue to do so. This of itself will effect an
intellectual revolution. Political science, which
in modern times has been literally upside down,
inasmuch as it put the last things first, should
develop into a real science of human affairs.

Whether, however, these plans are to be realized
or not, all depends on the attitude of the next
two or three years. Afterwards it will be too
late. Unless the present extraordinary spirit
of apathy can be shaken and drastic action taken
to deal with the situation, it is to be feared we
shall drift into a state of anarchy, lawlessness
and wild revolt from which there can be no appeal

112 GUILDS, TRADE AND AGRICULTURE

except to force. The danger is that instead of
getting to work to lay the foundation of the new
social order, of building the new system while
the old one is falling to pieces, we may, encouraged
by some brief revival of trade, deceive ourselves
into believing that there is no need of fundamental
change, or waste our time in discussing all kinds
of secondary issues — things against which we
are for the most part powerless, inasmuch as
they are symptomatic of the break-up of the old
order — all kinds of temporary measures, excessive
Government expenditure, high prices, high wages,
diminished output, etc., anything in fact except
the real central issues upon which our whole
future depends. Then nothing will get done
until it is too late, and starvation becomes chronic
among us, and Bolshevism as the scourge of God
comes upon us. If Bolshevism does come here
we shall have deserved it. For we are in an
infinitely better position to face the problems that
the war has left than the Continental nations,
for not only is our rate of exchange better, but
we are an Empire with vast empty spaces ready
to take our surplus population. One thing alone
can defeat us, and that is APATHY.

APPENDIX

EUROPE IN CHAOS '

I

TO-DAY the rates of exchange on London are :

New York, 3-45i~3-45l (*4S- 7d- to the £)•
Berlin, 256-257 (mark about £ of id.).
Paris, 58.75-58.80 (franc about 4d.).

The evidence, on which rests the arguments of these
articles, is found in the London rates of exchange current
since the Armistice. Thus it will be advisable to give
a few of the outstanding rates.

In the case of the United States the par of exchange
is $4.8665 to the £ ; on December 5, 1918, the rate was
$4.770 ; while on November 20, 1920, the rate was $3.470.
The rates for the Argentine were 5.040 pesos to the £
(parity), 4.665 (December 5, 1918), and 4.582 (November 20,
1920). For Japan the corresponding figures are 9.800,
8.972 and 6.857 yen to the £.

Thus it will be seen that the rates between London
and the two great industrial nations of the East and of
the West have moved considerably in a direction adverse
to London. In other words, the dollar is now 40.2 per
cent., and the yen 42.9 per cent, above their par value.

In the case of the Argentine, the movement is not so
pronounced, and the peso is only 10 per cent, above its

1 Daily News, December nth, I4th and i6th. See
Preface.

8 11S

1U GUILDS, TRADE AND AGRICULTURE

par value. Still, this is sufficiently disquieting when one
remembers the foodstuffs that we are in the habit of buying
from that country.

Returning to Europe, there are only two countries
whose London rates of exchange are above par. These
are Holland and Switzerland, both small nations that
remained neutral while the tide of war swept round them.
The Dutch florin on November n, 1920, was 6.3 per cent,
and the Swiss franc 13.7 per cent, above their par values,
the actual rates being 11.39 florins and 22.19 francs
respectively.

The remaining neutral nations of Europe are now at
or below par — Sweden exactly at par, Norway and Den-
mark 29.7 per cent., Spain 4.5 per cent. But when we
consider our late allies, and enemies, we find as we pro-
gress eastwards the position getting worse and worse.
On November nth, two years after the Armistice, the
franc in Paris was 56.2 per cent, below its par value, the
Italian lira 72.6 per cent., the Portuguese escudo 85.8
per cent., the German mark 91.9 per cent., the Bohemian
kroner 91.4 per cent., the Austrian kroner 97.9 per cent.,
and the Polish mark 98.6 per cent.

Now let us understand these percentages. Remember
that a depreciation of 100 per cent, means that a currency
is worth literally nothing for exchange purposes. Then
we can see how near the currencies of Europe are approach-
ing to this absolute zero.

Now what is the meaning of this ? And how does it
affect you and me ? And what is the future of Europe ?
Before we can answer these grave questions we must
understand the economic structure of Europe as it existed
before the war.

The present industrial system is of recent growth.
It was only at the close of the eighteenth century that
the ingenuity of man devised means by which the processes
of manufacture could be carried out by power instead
of hand labour. It is only during the last century that
the physicist and the chemist entered into our industrial
life.

The results of the " industrial revolution " were far-

APPENDIX.— EUROPE IN CHAOS 115

reaching. It was directly responsible for the modern
factory system, which gathered the peoples into large
towns and enabled the industrial countries of Europe
to maintain a vastly increased population. In fact, one
can say that if the present industrial system were destroyed
half the population of Europe must either emigrate or
starve.

The system by which Europe lived in pre-war days
may be described very shortly. Europe imported her
food and raw materials from overseas and exported, in
exchange, the products manufactured from the raw
materials she had imported the year before. These pro-
ducts were of greater value than the raw materials owing
to the skill and labour Europe put into them, and on this
difference Europe lived.

This is a rough outline of the system, but it needs several
qualifications. In the first place, the difference in value
mentioned above was greater than Europe's actual needs.
This difference was invested by Europe either in home
or overseas industries. This capital, in turn, helped to
create more wealth. Thus the European shareholders
received additional payments from abroad in the shape
of interest.

Secondly, Europe rendered many services to the rest
of the world ; her vessels carried American and Japanese
goods, her merchants dealt in them, her banks financed
the movements of these goods, and her insurance com-
panies protected them. All these services were paid for
and the payment, like the interest, came in the form of
goods — chiefly food and raw materials.

The essence of this system was exchange. We gave
our finished products and our services in exchange for
our food and raw materials. And the lever that operated
this system was called the Bill of Exchange.

A Bill of Exchange is, in simple words, a statement of
claim by a creditor on his debtor. Now an American
creditor needs payment in dollars, and a British creditor
in sterling, a Frenchman in francs. The weight of gold
in a sovereign, a 10 dollar piece, etc., is fixed by each
country's laws.

116 GUILDS, TRADE AND AGRICULTURE

Thus the gold exchange value between sovereigns and
dollars can be easily calculated, and this is called the par
of exchange. So it is normalty open to the debtor to
send gold in payment to his creditor. But the actual
shipment of gold involves expense, so he usually adopted
the second method.

This method is for him to find a creditor in his own
country who will sell him a Bill of Exchange or claim
upon a debtor in the country to which he himself owes
money, or in other words, an Englishman importing
cotton from America has to buy dollars with which to
pay for his cotton : for the American exporter, as a rule,
needs payment in his own currency.

Similarly an American buying goods from England
has to buy sterling, so he gets in touch with the English-
man who wishes to buy dollars, and the transaction is
arranged to their mutual advantage. But if England
has imported more than she has exported, there will be
several Englishmen trying to buy dollars for each American
who wishes to sell dollars for sterling. So the price of
dollars rises — for the demand exceeds the supply.

In other words, the rate of exchange will move against
England. Normally this movement will have a limit,
for English debtors will find it cheaper to ship gold. But
if we have prohibited the export of gold, or if we have a
paper currency which can be expanded at will, then,
as we see to-day, there is no automatic check to the
amount an exchange may depreciate.

It must be remembered that an expansion of currency
means a rise in prices, and the price of foreign bills or
foreign currency is not exempt from this law. Again, a
paper currency brings Gresham's law into operation, and
drives the gold out of circulation. Thus there is no gold
available which can be used for payment of foreign debts,
and the importers in that country are forced to pay
inflated prices for their foreign bills.

We have now described the system by which Europe
lived before the war. We see that it depended on a cycle
of exchange, and that the cycle was operated by the bill
of exchange, and the value of the bill of exchange was

APPENDIX.— EUROPE IN CHAOS 117

maintained, if necessary, by gold shipments. We see
that an unsound currency destroys that safeguard, and
thus strikes a heavy blow at the system on which Europe
lived.

The next point to consider is the effect of the war.
During the four years of war every effort of the various
belligerents was directed towards their mutual destruction.
Thus in England the Government took control of the
industries of the country and directed their energies to
the manufacture of munitions, which were used, not only
to destroy themselves, but also the products and factories
of pre-war industry. The effect of this was to reduce
the country's exports to a minimum, while the imports
of raw materials for munitions increased enormously.
The same applied to all the Allies, and the effect was to
pile up an enormous debt owed by the Allies to America.

To liquidate this debt, the Allies were forced in the
first place to sell their overseas investments. This entailed
the loss of the interest Europe had been receiving from
overseas. Later on the Allies in turn were forced to
borrow money from overseas.

Thus, in addition to the loss of her former interest,
Europe henceforward had to pay interest abroad. This
meant that to preserve the trade balance Europe ought
to increase her exports at a time when all her energies
were absorbed in the war.

Again, before the war, Europe paid for many of her
imports by rendering services to the world. But in time
of war she was unable to render these services, and so
lost another source of payment. Since the war this has
been partially recovered. But the Mercantile Marine of
Europe has not yet recovered from its war losses. More-
over, there has been a noticeable increase in the shipping
owned by the rest of the world. Similarly, the banking
and merchant system had been thoroughly disorganized.

Finally, every belligerent had to find the money neces-
sary for the prosecution of the war. This was done in
the first place by means of taxes and long-term loans.
These absorbed the surplus income and the savings of
the various countries, and so diverted them from their

118 GUILDS, TRADE AND AGRICULTURE

normal purpose of developing the economic life of Europe,
and turned them to the purposes of war and destruction.
But no country wholly paid for the war by these means,
and so the deficit had to be met by an increase in their
" floating debt."

The effect of a large floating debt, in its best form,
is to absorb all the ready money of the country, which
normally is put to a productive use ; in its worst form a
large floating debt leads to inflation of the credit and the
currency of a nation. By inflation is meant the artificial
creation of fresh purchasing power without a corresponding
supply of commodities which can absorb this purchasing
power. Thus the prices of commodities rise, and with
them the price of foreign currencies. Or in other words,
the foreign exchanges of the belligerents were depreciated
as a result of inflation.

Thus the effect of the war was to shatter in every possible
way the cycle of trade which upheld the pre-war economic
structure of Europe. It dammed the pre-war flow of
exports from Europe. It reversed the pre-war flow of
interest which formerly paid for some of Europe's imports.
It disorganized the means Europe had of rendering services
to the world. It used up and destroyed the stocks of
raw materials which Eujope possessed. And finally it
artificially inflated the currency and credit of Europe,
and by depreciating her exchanges rendered it even more
difficult for her to obtain those raw materials she needed
to restart her flow of exports. The cycle has been broken,
and it remains an open question whether it can be
repaired.

II

WE have seen that the effect of the war was to make
Europe break every law upon which her economic structure
rested. The position at the Armistice was tragically
simple, but most of us were too blind to see it.

Briefly, Europe was swept bare of raw materials, and
had no finished products with which to buy them. Her

APPENDIX.— EUROPE IN CHAOS

overseas investments had been sold and, in addition,
money had been borrowed from abroad with which to
pay for the war. Her commercial and financial system
was shattered, and her mercantile marine crippled by
the submarine campaign. All her savings, all her energy,
had been directed to the purposes of destruction.

There was very little left with which to re-start the
industries on which her very life depended. All she
possessed was large quantities of paper money, which
were more or less useless for the purpose of replenishing
her stocks of raw material.

Even so, the full story has not yet been told. The
war's toll in life and suffering must still be reckoned in
the account. Even those who returned unharmed found
that they had lost their habits of regular work. Again,
no account has been taken of the actual destruction that
the war was the cause of — the farm-lands of the Somme,
and the coal-mines of Lens.

Above all, we must add in the loss caused by the collapse
of Russia, which was the granary of Europe. If we total
up all these items, we see how great was the danger facing
us at the conclusion of the war.

It may be urged that Europe recovered from the
Napoleonic wars a century ago. This is true, but it
should be remembered that our industrial system was
still in its infancy. Practically every country was still
self-supporting, and had a far smaller population to
maintain. At that date Europe was still mainly agricul-
tural, and the different countries were not then bound
together into the component parts of one huge machine.

But if the facts in 1918-19 were as we have stated
them, what steps were taken at the Peace Conference to
save Europe from the effects of the war ? To speak
quite frankly, the Peace Conference hardly recognized
their existence.

Thus they discussed the possibilities of obtaining indemni-
ties from Germany. They did not realize that the only
possible way was to take over all German industries,
supply them with raw materials, and the people with
food, and run them as a " going concern " for what they

120 GUILDS, TRADE AND AGRICULTURE

could get by way of profit. This might have been
brutal, but the German people would have been pro-
perly fed.

Again, under the name of self-determination, the old
Austrian Empire was dismembered. The new States
that arose out of it promptly erected customs barriers
one against the other, thus failing to realize that they
could only exist if they looked upon themselves as one
economic unit. The result is now too obvious — namely,
that a state of financial and economic chaos has given
rise to a state of destitution and starvation.

Finally, as a result of the Peace Treaties the Allies
have been left with huge military commitments all over
the world at a time when every penny was needed to
re-start the industrial machine. It is clear now what
should have been done. It should have been seen that
the restarting of European industries was a race against
time, and that compared to this nothing else was of the
slightest importance. Food, materials and labour should
have been sent at once to where they were needed, and
no effort should have been spared to ensure that this
was done.

Instead of this petty quarrels have broken out in
Fiume, in Poland, in Asia Minor, in Mesopotamia, and,
in fact, all over the world. These have all involved
expense, and forced the Governments of Europe to resort
to further inflation. No Government is guiltless, and
least of all the Peace Conference.

The result of this is seen in the exchange movements
that have taken place since the Armistice. They show
us the result of national extravagance, especially of our
military adventures. At this season of the year Europe
has to purchase the world's crops of wheat, cotton, etc.,
without which she cannot exist. She has nothing with
which to pay for them, except a few manufactured products
and paper money.

The value that the world attaches to this paper money
is shown by the present rates of exchange. Compare,
too, the present rates with those current a year ago,
when Europe was purchasing last year's crops, and it

APPENDIX.— EUROPE IN CHAOS 121

will be clear that Europe is slowly sinking under the
burden that the war placed on her shoulders.

Thus, in December 1919 our pound was worth 3 dollars
8 1 cents in New York ; in November 1920 only 3 dollars 44
cents. In December 1919 our pound would buy 41.03
francs, 49.63 lire, and 181.53 marks (contrast even these
rates with the par of exchange). In November 1920
these rates were 57.17 francs, 95.13 lire, and 262.89 marks.
This shows the extent to which the dry rot has spread
during the year.

The cause of this rot is plain — Europe must buy in
order to live, but she has nothing to sell. And unless
the cycle of trade is restarted, she will still have nothing
to sell.

It may be asked : " What steps have the Governments
taken in order to rectify this position ? " The answer is
that most steps taken by the Governments have resulted
in aggravating the position.

There is no need to call attention to the extravagance
of the various Governments. The word is on every one's
lips, and the pity is that people do not realize the direction
in which extravagance is leading us. For every fresh
load of debt, every fresh issue of paper money brings
the final tragedy nearer — when the machine on which we
depend, and which is already tottering under the blows
dealt it by the war, will be unable to serve us any longer.

It is easy to give examples of the results of this extrava-
gance— Continental inflation and British E.P.D. The
first renders it more and more impossible for the Continent
to buy, the second renders it difficult for our industries
to produce the goods the Continent needs at a price
they can pay. But whatever it results in, one thing is
clear : This extravagance must cease, if Europe is to
be saved.

Among other steps taken, various Governments have
attempted to regulate their exchanges. This was done
during the war with fair success ; but it meant the loss
of our overseas securities, and also the raising of foreign
loans. But after the war the exchanges had to be left
to find their own level, with the result we now see.

122 GUILDS, TRADE AND AGRICULTURE

Sporadic attempts, however, have been made to arrest
their fall. The fall in sterling was arrested temporarily
by the shipment of gold last March to New York, and by
reduction in purchases. A month later France arrested
the fall of the franc by a very drastic series of import
restrictions. That they were only partly successful was
probably due to further Government extravagance.

The Portuguese Government tried to fix their exchanges
by an arbitrary decree, but found that the only result
was to cut off their imports. Lastly, our own attempts
to regulate the currency in India and East Africa have
met with a large amount of justifiable criticism.

Any attempt of this kind is bound to fail, for the
rates of exchange are but a symptom of the economic
illness from which a country is suffering. It is useless
to remove the symptom without removing the cause of
the illness, and so it is useless to regulate a rate of
exchange while leaving the cause of its depreciation
untouched.

If any further evidence is needed of the breakdown of
the economic machine, it is found in the wild price fluctua-
tions that have been rampant during the past two years.
It is comparatively easy to trace these price movements
and also their causes. The Armistice found Europe
swept bare of all her stocks of goods. Her industries
were all mobilized for the production of munitions, while
her peoples had an ever-increasing supply of paper money
in their pockets.

As industry resumed a peace footing, orders flowed in
from all over the world, and every factory was filled up
with orders for months ahead. It is no wonder that
prices began to soar, while speculation was rampant, and
huge profits became the rule. Nor is it surprising that
the workers claimed a share in these profits, and a better
wage with which to meet the rise in prices.

Disastrous strikes followed until these higher wages
were granted, and the mere granting of them entailed a
rise in production costs, which forced the manufacturer
to maintain his swollen prices. Nor can the Governments
be absolved from profiteering. The British Government

APPENDIX.— EUROPE IN CHAOS 123

enforced a Profiteering Act at home, while they were
selling coal at £10 per ton on the Continent.

The effect of these high prices quickly showed itself
in the rates of exchange, and by the middle of this year
the Continental exchanges had depreciated so badly that
Europe was unable to buy our goods. Then the break
came, and prices began to fall. This fall brought with
it dwindling profits, in some cases enforced liquidation,
and in most trades unemployment for the workers. The
boom in British trade was broken, and the slump is only
now beginning.

This is the position to-day. Europe is dying for lack
of our goods, but Europe cannot produce the goods she
needs in order to pay for ours. For we cannot take pay-
ment in paper money and depreciated currencies. So
our export trade is going, our industries are being slowly
strangled, and our men are being thrown out of work.
That is what the collapse of Europe means to us, and now
we can only see the beginning. Remember that as we
go eastward from the Bay of Biscay the exchanges become
worse and worse — until we reach Russia, where the rouble
is absolutely worthless. Watch the rates of exchange,
and then ask yourself, " What will be the end ? "

III

WE have seen that before the war Europe supported a
larger population than she could have fed from her own
produce by exporting finished goods, by the interest on
her overseas loans and the payment for her services.

The war has decreased or destroyed the last two sources
of income and replaced them by claims for interest on
war loans, which means that henceforth she must export
more than she imports instead of being able to do the
reverse as she did in 1913.

Moreover, the supply of finished goods with which she
bought next year's food and raw materials no longer
exists. Unless, however, she can get these essentials
she cannot restart her industrial system, and having no

124 GUILDS, TRADE AND AGRICULTURE

goods to give she can only offer paper money. This being
only of use if foreigners can exchange it for goods, has
continued to depreciate steadily since peace was made,
as there are not the goods.

In short, the position, after two years' peace, is, as
shown by the rates of exchange, far worse than in 1918.
Therefore, Europe is slowly drifting into a state of bank-
ruptcy, which means that ultimately she will no longer
be able to buy the bare necessities of life. When that
happens the whole system must collapse. What that
means is shown by the condition of affairs in Russia, a
country, which, being mainly agricultural, should have
been able to feed itself if any European country could.

The possibility of such a catastrophe is so terrible that
so far no one has dared to suggest it, but the writers feel
that unless people realize where they are drifting no
efforts to avert it will be made till it is too late. They
do not say that even now it is impossible to save Europe,
though it will be no easy task, but they do say, if things
are allowed to drift for another two or three years it will
be too late then. It is certainly possible to save Great
Britain to-day ; by then it may be too late.

Unfortunately there are not wanting other indications
that our civilization is in danger. We can only tabulate
these briefly, but whenever in history a civilization has
been approaching its end similar indications have appeared.

They include a marked laxity in the morals and an
open challenge to the established moral codes. For
example, " The Right to Motherhood " shows what is
meant. The failing influence of the orthodox faiths,
love of luxury and extravagance at a time when tens of
thousands are suffering from want ; a spirit of lawless
violence, coupled with a strange apathy on the part of
a large section of the community, are characteristic indica-
tions of a decaying civilization.

Though these vices are noticeable in Great Britain
to-day, they are not nearly so marked as in many Conti-
nental countries, and only emphasize the more the fact
that Great Britain is still healthier than the Continent.

As the situation on the Continent goes from bad to

APPENDIX.— EUROPE IN CHAOS 125

worse, we find it increasingly difficult to sell our goods.
We, above all countries, are dependent on our export
trade, and it is poor consolation for us to know that
America is suffering in proportion, even more severely
in her export trade, from the same cause. America can
feed herself still, whereas we cannot. To her, external
trade is almost a luxury, to us it is an absolute necessity.
Without it, half our population will starve.

Already we are witnessing the gradual closing of our
Continental markets, and almost a panic among our
manufacturers at the possibility of being undersold in
the home markets by the Continent, but this aspect of
the case was dealt with in the Daily News on November 26th.

Unless the decline on the Continent is stopped, this
strangling of our industries will continue, and it behoves
us now to consider seriously what we shall do in that
event. There is no need for panic, but that is far less
likely than apathy and contemptuous unbelief till the
crisis is on us. By then it will be too late. Rather let
us take such a possibility into our reckoning, and begin
to prepare alternative plans.

If Europe can be saved, then gradually things will
right themselves, and the first thing to be done is for every
Government at home or abroad to reduce its expenditure
to the very lowest that is possible, even if this entails
the abandonment of desirable social schemes or valuable
military positions. We simply cannot afford them.

Every country must not merely increase production,
but see that the goods made are exchanged for the
things they must have. It is no use filling warehouses
with goods which our neighbours cannot buy because
their exchanges are so badly depreciated. We in Great
Britain must open up new markets, if necessary, by means
of barter, particularly with countries other than the
United States of America, from which we can get food or
raw materials — for example, Poland and Russia.

But supposing Europe cannot be saved, what will
happen ? Briefly it will be impossible to transport
the excessive millions in Europe overseas. What will
happen to them is what has happened in Russia,

126 GUILDS, TRADE AND AGRICULTURE

and to-day is happening in Poland and Austria — they
will die.

Those who survive will revert to an agricultural race,
with but simple industries and no elaborate industrial
system. Do not think that this picture is too highly
coloured. Five years ago, would you have thought it
possible that Russia would have reached the condition
she is in to-day ? Russia, remember, represents one-
quarter of the earth's surface. As we move eastward
from the Bay of Biscay to the frontiers of Russia, we
find that the exchanges fall consistently. On November
3oth France was 57.80 francs to the £, Italy 95.50, Ger-
many 250, Austria 1,175, Poland 1,750, Hungary not

quoted, Russia ! And on the frontiers of Poland

gather a pack of starving men looking hungrily westward.

What is the alternative to the present system if it
does not recover ? It is not Bolshevism. That is the
last resort of desperate, starving men. It may come
when the last agony of dissolution is upon Europe, but
it cannot reorganize and feed the present large population.
It has already appeared sporadically in Hungary, Germany
and Italy. It has been driven underground — perhaps —
but only for a time. If you want to prevent Bolshevism
see that the people are well fed. That, however, is just
what we are unable to do in many parts of Europe. The
machine that did is broken by the war, it is still freely
rotating, but each month it moves slower and with more
difficulty.

If we cannot save Europe, can we at least save ourselves ?

Yes ! if we prepare in time, Great Britain can be saved,
but it will not be the Great Britain we knew and loved
before the war. With our Continental markets gone, and
our export trade crippled, we shall not be able to support
our present population.

A drastic land policy would settle on the countryside
millions who are now congregated into industrial areas.
Millions would have to emigrate to our Overseas Dominions
and Colonies. Herein lies our strength. We are an
Empire with vast empty spaces, with lands which can
produce the food and raw materials we shall still need,

APPENDIX.— EUROPE IN CHAOS

and supply us with the simple things of life, which we
can barter with the more primitive peoples of Europe.

Our industries will dwindle, but our geographical position
will enable us to remain a great seafaring and merchant
race. As the last outpost of the industrial west (by then
the United States of America) we can still carry the mer-
chandise of those countries which cluster round the Pacific
to those who dwell in Russia and barter them for the
minerals and raw materials they are prepared to offer.

But it will be a smaller England with probably less
than half its present population and perhaps a humbler
member of the British Empire than it is to-day. Do
not let us suppose that we can continue indefinitely to
export huge quantities of manufactured goods to Australia,
Canada, or even South Africa. During the war these
countries have been developing their own manufactures
near the spot where they produce raw materials. This
process is bound to continue.

Has it ever struck you how the centre of industry,
commerce and civilization has shifted ever westward ?
In classical days the Mediterranean was the centre, in
the Middle Ages it was the Baltic, where the Hanseatic
League ruled. In the sixteenth century it shifted to the
Atlantic. What if it is again moving to the Pacific,
where America and Australia face China and Japan ?
Look at the rates of exchange of Japan and the United
States of America if this possibility seems fantastic.

But it takes time to move millions of men, and if the
industrial system is breaking down, what will take its
place ? State Socialism cannot, for it presupposes a huge
industrial machine. Perhaps the Guild Socialists have
seen a vision of the ultimate solution, but, if so, they must
descend from the clouds and begin to construct their
system here and now.

It is useless to imagine our Guildsman will straightway
become a saint. He will be exactly the same man who
at present forms part of the industrial system. In time
a better system may produce more perfect men, but they
must evolve by degrees.

Meanwhile, the wise man uses the material he has to

128 GUILDS, TRADE AND AGRICULTURE

hand, and in truth the average Briton, despite his faults,
is still the cream of the earth. In short, why not begin
to build the new system to-day, so that it is a running
machine by the time the old one breaks down completely ?
But still, perhaps, this appears a nightmare dream.
What if, after all, it is but the darkness before the dawn
of better things ? Nightmare or vision of the dawn,
take your choice, but look at the writing on the wall and
ask which country follows Russia, and the answer is given
to you by the rates of Exchange.

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UNWIN BROTHERS, LIMITED, THE GRESHAM PRESS, WOKING AND LONDON

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